Tax Bill Unlikely to Contain Controversial Provisions

Article excerpt

There will be a tax bill this year, but it is unlikely to involve any major overhaul of the tax code or substantial new tax increases.

So goes the prevailing wisdom among tax policy makers and lobbyists as the Bush administration and Congress take their first tentative steps toward negotiation on the budget for the 1990 fiscal year.

But predictions about tax legislation, like government economic statistics, are seasonally adjusted in Washington D.C. The prevailing wisdom of March often yields to the budget reality of September.

And by then the Senate Finance Committee and the House Ways and Means Committee could find themselves scrambling for new sources of revenue to meet deficit reduction targets or to offset the costs of new programs that Congress chooses to finance through tax credits rather than direct federal outlays.

Should that occur, the most likely sources are an increase in the gasoline tax, higher excise taxes on beer, wine, spirits or cigarettes or further tightening of tax breaks on interest deductions or fringe benefits.

Despite new proposals by President Bush to finance programs like child care and business enterprise zones, Rep. Dan Rostenkowski, D-Ill., who heads the House Ways and Means Committee, is betting against a raid on the Treasury.

``If Congress and the president do feel a need to act this year, they'll want to do it on the cheap,'' he said. ``That means either programs that at least start small so they can be squeezed into the budget, or programs that cost the government nothing at all - with the burden shifted to others.''

Indeed, in the two months since the 101st Congress convened, Rostenkowski and Sen. Lloyd Bentsen, D-Texas, who heads the Senate Finance Committee, have said what they will not do on taxes.

The chairmen have made clear that they have no plans to overhaul last year's catastrophic health insurance law, despite complaints about its higher Medicare premiums and income tax surcharges.

They have been chilly to Bush's proposal for a reduction in long-term capital gains taxes, and promised real estate interests that there will be no tampering with the home mortgage deduction.

Behind all the caution on tax policy lies a political and economic environment that gives Democrats and Republicans good reason to avoid an assault on the tax code this year. The most important political reality is Bush's campaign pledge of no new taxes.

Rostenkowski and the House speaker, Jim Wright of Texas, have both been stating that any effort to reduce the federal budget deficit will have to include significant revenue increases.

But they have also made it clear that Democrats are not prepared to make such a move without the firm public support of Bush. And lawmakers in both parties do not believe that Bush would accept a broad-scale tax increase this year.

Another factor working to keep the tax code a minor element in this year's budget debate is the arithmetic of the Gramm-Rudman-Hollings balanced budget law.

As revised in 1987, the law requires Congress to hold the deficit to $100 billion in fiscal 1990 to avoid automatic across-the-board cuts.

Congressional and administration budget analysts have calculated that absent any major downturn in the economy or dramatic rise in interest rates, the deficit target can be achieved without tax increases this year - a calculation that can change. …