The Administration strongly opposes H.R. 3097 because it would create
substantial risks for the Nation's economy and the American people. At a
time when our country enjoys the strongest economy in a generation, it
would be irresponsible to put that economy, our country's fiscal
discipline, and the well-being of its families at risk. If H.R. 3097
were presented to the President, his senior advisors would recommend that
he veto the bill.
The Administration is already working to reduce unwarranted complexity in
the tax laws, to protect taxpayer rights, to enact legislation
restructuring the Internal Revenue Service (IRS), and to continue to
refocus the IRS on customer service, fairness and efficiency. The
Administration urges the Congress to complete action on H.R. 2676, the
Internal Revenue Service Restructuring and Reform Act, which passed the
House of Representatives on November 5, 1997.
The Administration also stands ready to consider carefully all proposals to
reform the tax system comprehensively. The proposal contained in H.R.
3097, however, provides no reform plan. Moreover, none of the reform plans
currently being discussed meets the criteria set forth by the President to
evaluate tax reform proposals: fairness; fiscal responsibility; positive
impact on economic growth; and simplification.
As Secretary Rubin has indicated in the attached letter to the
Congressional leadership, the proposal in H.R. 3097 to sunset the tax code
is a deeply flawed idea that, if enacted, would harm the Nation's strong
economy. For example, some families would likely refrain from buying homes
due to the uncertain future tax treatment of mortgage interest and property
taxes (as well as all other State and local taxes), which would harm
current homeowners. Many businesses would hire fewer workers and make
fewer capital investments because of uncertainty about how taxes would
affect the return on productive assets. Furthermore, the uncertainty of
the bill's effect on future receipts would raise the specter of massive
Federal deficits which, in turn, would increase interest rates and weaken
or destroy economic growth.
H.R. 3097 would have many other harmful effects on the well-being of
families. A family's health insurance would be threatened because the tax
status of employer-provided health benefits would be uncertain. Hope
Scholarships, which make higher education more affordable for students,
would be in jeopardy, as would the child tax credits that help families
with the costs of child-rearing. The structure of the employer-provided
pensions and tax incentives for retirement could be altered in ways that
could harm retirement income security.
H.R. 3097 would affect receipts; therefore, it is subject to the
pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990.
Beginning after 2002, the bill (as amended) would terminate both federal
income taxes -- corporate and individual -- in addition to eliminating most
other sources of Federal revenue. Because the bill establishes no
alternative federal tax system and contains no offsets, it would reduce
Federal receipts by hundreds of billions of dollars beginning after FY
2002. Under the Budget Enforcement Act, this would trigger a massive
sequester of Federal programs with a broad range of unacceptable