Betting that a strong economy will continue to pump up government revenues and quickly eliminate the federal deficit, Republicans in Congress are laying the groundwork for election-year tax cuts in 1998.
The possibilities include more breaks for married couples and investors, tax-sheltered education accounts that would help parents send kids to private schools, and a new idea: middle-class income tax reduction.
“I am committed to a strong effort for another tax reduction bill next year,” House Ways and Means Chairman Bill Archer, R-Texas, said in an interview. “We anticipate the possibility that we’ll be ahead of schedule in balancing the budget, which would give us the opportunity for some additional tax cuts.”
But some fiscal conservatives argue that any tax revenue windfall should go to balancing the budget and to reducing the national debt. That would allow more time to prepare for soaring Medicare and Social Security costs when the baby boom generation begins retiring a decade from now.
Archer would not speculate on the overall size of a tax cut, or on any individual components. Some conservative economists estimate it could be in the range of $50 billion over five years - about half the size of this year’s package. Archer said he would wait for new Congressional Budget Office deficit projections in January before making any decisions.
It’s not clear yet whether there will be money for cuts. Private economic forecasting firms disagree on whether the government will meet its goal of a balanced budget by 2002.
“We think it’s premature to be making a decision on what to do with revenues before they even appear,” said Susan Tanaka of the Committee for a Responsible Federal Budget, a nonpartisan group that opposes another round of tax cuts or spending increases.
Nonetheless, plans for cutting taxes are going forward. Senate Finance Committee Chairman William Roth, R-Del., and House Speaker Newt Gingrich are in strong support. “It makes good sense to return any surplus to the taxpayer,” Roth said.