Senate Panel Chief Offers A New Tax Cut Republican Roth’s Plan Even Tempts Some Democrats

The Republican chairman of the Senate Finance Committee offered a new $85 billion tax-cut plan Tuesday, and several Democrats took a wait-and-see stance rather than propose a version more suitable to President Clinton.

The bill outlined by Sen. William Roth, R-Del., generally tracks the one approved last week by the GOP-controlled House Ways and Means Committee, including a $500-per-child credit and reductions in capitalgains and estate taxes. Roth seeks a bigger estate-tax reduction but seeks no provision for protecting capitals gains against inflation.

Lack of a Democratic alternative to Roth’s bill reflects Democratic senators’ displeasure at being largely excluded from the extended talks that led to a May 2 agreement between Clinton and Republican leaders to balance the budget by 2002.

The committee’s ranking Democrat, Sen. Daniel Patrick Moynihan of New York, said Roth is “being very good” about moving toward “a bipartisan bill, which is a tradition of the Finance Committee. … We may find we have a bill we like.”

Other Democrats on Roth’s committee welcomed his willingness to consider their views in drafting the tax bill.

“I’d rather be involved in the process - getting what we think are good items in the bill,” Sen. John Breaux, D-La. said. “By participating in the process, we’re already making the chairman’s mark (bill) better.”

Treasury Secretary Robert Rubin recognized a separate bill won’t be pursued when the committee begins voting on the measure Thursday.

“I think the Democrats on the finance committee have contributed by working with Republicans,” Rubin said. “They’ve managed to move away from some less desirable aspects of the Archer bill,” he added, referring to the House GOP measure drafted by the Ways and Means Committee chairman, Rep. Bill Archer, R-Texas.

Despite Rubin’s careful public statement, a senior Treasury official, speaking on condition of anonymity, said the administration still had “real concerns” about the Roth bill’s approach to education and fiscal issues. The Treasury released a study showing two-thirds of the benefits going to upper fifth of taxpayers.

The Roth bill calls for a total tax cut of $138 billion offset by new revenues of $53 billion, for $84.9 billion in net tax relief over five years.

It contains much broader estate-tax relief than the Archer bill, by allowing individuals with small businesses or family farms to shield as much as $2 million from estate taxes, up from the current $600,000 exemption. It would extend the installment payments for estate taxes from 14 years to 24 years.

Like the Archer bill, the Senate version proposes to cut the capital-gains rate, the tax on sales of stock, bonds and other assets, from a maximum 28 percent to 20 percent for individuals making more than $24,650 and couples making more than $41,200. For people making less than that, the 15 percent capital-gains rate would be cut to 10 percent.

But in a significant departure, the Roth bill doesn’t include “indexing,” which would reduce the capital-gains tax to account for inflation.

Unlike Archer’s Roth’s bill does not include repeal of the tax subsidy for ethanol - the corn-based alcohol additive for gasoline - or the reduction in corporate alternative minimum tax, which is aimed at ensuring profitable businesses pay some tax after claim their deductions.

Roth calls for $81.5 billion in family tax relief, including a $500-per-child tax credit for children under age 17.