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Five Measures Picked Out For Line-Item Veto All Small-Ticket Provisions, But Present Political Peril

Fri., Aug. 8, 1997

Taking a meticulous look at new special-interest tax breaks, President Clinton and his advisers have come up with five measures that could be targets for a first-ever line-item veto, congressional sources said Thursday.

Except for one, the items are small-ticket provisions in the $152 billion tax cut bill. But each presents its own political peril. As a result, the White House remained undecided Thursday on which ones, if any, to veto, according to two sources, who spoke on condition they wouldn’t be identified further.

Of the 79 items vulnerable to the president’s line-item veto authority, one of the sources said “there’s only about five that have the potential to get bumped.” They are:

Lower taxes for hard cider. The provision, supported by Sen. Daniel Patrick Moynihan, D-N.Y., would reduce the tax on alcoholic or “hard cider” from the current rate for wine to the lower rate for beer. The provision would cost $3 million over five years.

Sugar beet processor. This item, which would cost $84 million over five years, allows for deferral of taxes on the sale of a sugar beet processing facility owned by Texas businessman Harold Simmons to a farmer-owned cooperative.

Stock donations to ESOPs. Allows heirs to Sammons Enterprises to avoid estate taxes by donating the late owner’s stock to an employee stock ownership plan, or ESOP. Sponsored by Rep. Sam Johnson, R-Texas, the provision has a $23 million five-year cost to the Treasury.

County employees’ expenses. Supported by Senate Majority Leader Trent Lott, R-Miss., this item permits county offices in 34 states more favorable tax treatment for expenses after they pay their employees. Five year cost: $27 million.

Amtrak rescue. A rescue plan provides the Amtrak passenger rail system with more favorable treatment of net operating losses at a cost to the Treasury of $2.3 billion over five years.

The second source confirmed that the hard cider and sugar beet plant provision was under consideration, but didn’t have direct knowledge of the others, although he said they would be likely candidates.

Before Clinton signed the tax bill on Tuesday, the Joint Committee on Taxation released a list of 79 items in the legislation that could be subject to line-item veto.

Mike McCurry said the “vast majority of (veto-eligible items) fall in the category of things that look like they are reasonable tax policy.”

“It will be clear to the Congress that he’s willing to use an authority available to him under law to strike and cancel wasteful discretionary spending or tax expenditures,” McCurry said. “And that message presumably will instruct Congress as it prepares future legislation.”

Rahm Emanuel, a senior adviser to the president, said he expected Clinton to use his line-item veto power on the bill. “This is not message-sending; his is policy-setting,” Emanuel said. “… It’s not like we’re desperately seeking a veto.”

In a series of top-level staff meetings, Treasury Secretary Robert Rubin, White House chief of staff Erskine Bowles, National Economic Council Chairman Gene Sperling and other officials pared the list of 79 eligible veto targets to less than 10, McCurry said.

The rest are proposals the administration supports, agreed to as concessions to the GOP in budget negotiations, or sees as reasonable corrections for unintended consequences affecting a small number of taxpayers.

The political decisions are difficult. Eliminating the apple cider and county clerk tax breaks would mean crossing two powerful senators: Lott, the Senate’s top Republican, and Moynihan, ranking Democrat on the Senate Finance Committee. The Amtrak rescue plan was strongly supported by Moynihan and Senate Finance Chairman William V. Roth Jr., R-Del.

And targeting the sugar beet item would anger the farm lobby.

Congressional supporters of a tax break for sales of agricultural processing plants to farmer-owned cooperatives fought to counter charges that it would mainly benefit Texas businessman Harold Simmons, a prominent Republican supporter.

Rep. Kenny Hulshof, R-Mo., wrote Clinton that “nothing could be further from the truth” and that a wide range of national farm groups had supported the measure.

House Speaker Newt Gingrich and other GOP leaders warned that any veto on the negotiated deal would darken prospects for future cooperation. Sen. John McCain, R-Ariz., wrote Clinton urging that “for the sake of comity between the Congress and the White House, I hope you will not use the line item veto to strike items from the deal.”

xxxx IN LINE FOR VETO Lower taxes for hard cider. The provision would cost $3 million over five years. Sugar beet processor. This would cost $84 million over five years. Stock donations to ESOPs. The provision has a $23 million five-year cost to the Treasury. County employees’ expenses. Five year cost: $27 million. Amtrak rescue. Cost to the Treasury of $2.3 billion over five years.


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