House Republicans Will Push For Tax Hikes On Business, Poor Money Raised Linked To Other Proposed Tax Cuts

Taking another politically perilous step in their march toward a balanced budget, House Republicans have decided to push for passage of significant tax increases that would hit both moneyed business interests and low-income working families.

The tax hike bill, drafted by Ways and Means Committee Chairman Bill Archer, R-Texas, would raise some $30 billion over seven years by eliminating tax breaks for an array of corporate interests - including the movie industry, pharmaceutical manufacturers and insurance companies.

In addition, it would generate $20 billion over the same period by imposing new restrictions on the Earned Income Tax Credit, which was designed to pull working families out of poverty.

The proposed increases, if approved, would be linked to a $245 billion package of tax reductions that are considered the centerpiece of GOP tax policy. Those, in turn, would become part of a farreaching package of deficit-reduction measures expected to move through Congress this fall.

Likely cries of protest from movie moguls, insurance agents and others who stand to lose substantial tax advantages under Archer’s legislation could add to the difficulty of passing the GOP budget package, which already contains politically explosive proposals to curb the growth of Medicare, cut farm subsidies and slash spending across a broad range of federal programs.

The Center on Budget and Policy Priorities, a Washington-based research group, noted that the $30 billion reduction in business tax subsidies would pale in comparison to the business tax breaks that would remain on the books and the new ones that Republicans have included in their $245 billion tax relief package.

Indeed, some of the proceeds from cutting business tax breaks, derided by some critics as “corporate welfare,” would go back to other businesses. The Archer bill would extend several tax breaks that are about to expire.

Some Republicans acknowledged that they hope Archer’s effort to scale back or eliminate more than two dozen business tax breaks will help insulate the GOP from growing criticism from across the political spectrum - that it is not doing enough to fulfill its promise to eliminate inappropriate business subsidies at the same time it reduces spending on assistance programs for the poor.

One of the biggest and most controversial tax breaks that Archer would eliminate is a credit enjoyed by U.S. companies operating in Puerto Rico and other U.S. territories. Archer proposes a 10-year phase-out of the credit, which primarily benefits pharmaceutical companies. The drug makers are expected to lobby hard to preserve the tax break.

The working poor would be hit by Archer’s proposed limits on the Earned Income Tax Credit, which cuts the tax burden of households earning up to about $27,000 a year - a program that Republicans traditionally have praised because it rewards work.

Archer’s plan would reduce the annual income limit on eligibility for the credit to about $23,600 and disqualify entirely workers without children. The bill would make it harder for the elderly to qualify by requiring that Social Security be counted as income in determining eligibility. Archer said that the changes are “designed to cut fat while protecting the benefits of working families who need help the most.”