Clinton's Tax Bill Text UnvieledBy David S. Hilzenrath
The Washington Post
From the canyons of K Street to the cubicles of Capitol Hill in downtown Washington, lawyers, accountants, lobbyists and legislative aides spent Monday absorbed in the hottest page-turner to hit the city in weeks. They searched every nuance for hidden meaning and flipped breathlessly in pursuit of surprise twists.
The tome is the catchily titled "Revenue Reconciliation Act of 1993," the long-awaited 263-page text of the tax bill President Clinton has proposed to provide tax incentives for business and raise $272 billion over the next five years.
Among the highlights, Clinton is asking Congress to:
* Raise the individual income tax rate to 36 percent for to single taxpayers earning more than $115,000 a year and couples earning more than $140,000 a year.
* Add a 10 percent surtax to the top rate for individuals earning $250,000.
* Expand the earned income tax credit for families of the working poor and some low-income workers who have no children.
* Create a broad-based tax on energy that the administration says would be borne entirely by consumers.
* Raise the top corporate tax rate from 34 percent to 36 percent.
* Cut the deductible share of business meals and entertainment from 80 percent to 50 percent and eliminate the tax deduction for club dues.
* Create a permanent investment tax credit for equipment purchases by small businesses and a temporary investment credit for stepped up equipment purchases by big businesses.
* Tighten tax provisions that enable corporations to shelter some income derived from international business.
Clinton also has proposed increasing the taxable portion of Social Security benefits from 50 percent to 80 percent for individuals earning more than $25,000 and couples earning more than $32,000, although that request is not part of the newly published tax bill.
The measure begins its legislative path through Congress Tuesday as the House Ways and Means Committee begins a line-by-line examination of the bill. Perhaps as soon as later this week, the panel will begin voting on whose taxes to raise and which taxpayers should get a break.
The bill finally laid out the details of Clinton's proposals, stripped of political rhetoric about "shared sacrifice" and individual "contribution."
The investment tax credits Clinton proposed to create jobs and improve business productivity, already facing strong opposition in both Congress and the corporate world, came with a couple of catches that made them even less attractive to their intended beneficiaries.
The permanent investment credit for small businesses could be applied to investments of no more than $270,000 during the first year and $250,000 thereafter, accountants said. Most businesses eligible for the credit would have room to spare, but some would bump against the ceiling, analysts said.
In addition, businesses that bought cars for more than $9,600 could not apply the tax credit to the excess, accountants said. "It means that people who thought they would be getting a benefit aren't getting it," said C. Clinton Stretch of the accounting firm Deloitte & Touche.
Although critics on Capitol Hill have fretted that Clinton's proposed tax incentives for business could spawn new tax shelters, the bill attempts to prevent tax shelters based on equipment leases from growing up around the investment tax credits.
Similarly, where Ways and Means Chairman Dan Rostenkowski, D-Ill., has warned that wealthy taxpayers might escape the proposed higher income tax rates by converting their ordinary income into capital gains income taxed at a much lower rate, the bill contained a provision to make such financial contortions difficult.
While the proposals were all there in black and white, analysts also found shades of gray that kept them guessing about some of the evolving fine points.
Clinton's populist plan to puncture corporate executive pay he claimed is overinflated seemed to become murkier in the legislative language.
During last year's presidential campaign, Clinton said he would put a $1 million cap on the tax deduction a corporation could claim for the amount it pays a chief executive.
Last month, the Treasury Department said it would make an exception if a corporate board of directors tied a larger pay package to specific performance goals and got shareholders to approve the arrangement.
As is often the case, the impact of that proposal hinged on the details. But the newly published bill left unclear how explicitly the issue would be put to shareholders, analysts said.