Clinton Meets Gop Halfway On Tax Plan But Tells Republicans He Wants Tuition Aid

Professing his eagerness to work with Republicans on tax cuts, President Clinton on Monday offered a spate of important concessions but warned that the GOP must do much more to help the middle class.

Clinton’s new plan provides for significant capital-gains tax cuts, despite the administration’s previous complaints that this GOP priority mostly benefits the rich while doing little to advance its ostensible goal of spurring investment.

At the same time, Clinton adapted numerous other ideas included in tax-cut bills that passed through the House and Senate last week. For example, he proposed expanding eligibility for a planned $500-per-child tax credit. Clinton’s budget plan cut off the benefit for children over 12, but he nows favors increasing it to 17 though 2002 and 19 after that.

Clinton also endorsed the Senate’s idea of “Kidsave” tax-deferred savings accounts to help parents pay for education. He also embraced a 20-cents-per-pack increase in cigarette taxes, passed last week in the Senate, provided that the money is dedicated entirely to expanding child health care.

Finally, he made a nod toward GOP demands for estate-tax relief, proposing to exclude family farms or businesses from taxes up to a value of $2.1 million.

Clinton’s bill cuts taxes by $85 billion over five years, the same as the House’s proposal and $8 billion more than the Senate’s. But there are still important differences over details, particularly the issue of how generously to support Clinton’s plan for tuition subsidies for the middle class.

But even as Clinton moved toward Republicans, he sent a clear, if soft-edged, warning that Republicans will have to move toward him. Both the House and Senate bills fall far short of his priorities, Clinton said, particularly by not fully accommodating his desire for $1,500 tax credits to offset the cost of college tuition.

On this score, he said, both bills are “clearly inconsistent” with the recent balanced-budget agreement.

But Clinton brushed aside a question about what he would do if Republicans don’t yield. “I don’t want to start talking about veto now,” he said.

Yet, other administration officials later made clear that, if Republicans dig in, Clinton is ready to join congressional Democrats in deriding the GOP as the party of the rich.

Even on Monday, the White House was releasing charts asserting that, over 10 years, Clinton’s tax-cut plan would bestow two-thirds of its benefits on those in the middle 60 percent of income levels. Republican versions, the chart said, would lavish two-thirds of its benefits on the top 20 percent.

In addition, Clinton continued his criticism that Republican proposals would rise dramatically in cost after 10 years. One reason, said Treasury Secretary Robert E. Rubin, is that they do not place income limits on the tax-deferred retirement accounts. He also cited the indexing of capital gains to account for the effect of inflation.

Only the House version calls for indexing capital gains.

Clinton also made significant changes in his education plan. Initially, he favored offering people a choice between a $1,500 tax credit or a $10,000 annual deduction. His current plan offers tax credits of up to $1,500 on the first $2,000 spent annually for students in the first and second year of college.

Those in later years of college or graduate studies would, under Clinton’s latest plan, be eligible for a 20 percent tax credit on the first $5,000 spent annually until 2000, and the first $10,000 spent annually after that.

MEMO: This sidebar appeared with the story: MIDDLE GROUND Some GOP ideas Clinton endorsed: The Senate’s “Kidsave” tax-deferred savings accounts to help parents pay for education. A 20-cents-per-pack increase in cigarette taxes. Estate-tax relief for family farms or businesses.