DEPARTMENT OF THE TREASURY
                             WASHINGTON, D.C.


                               July 20, 2000

The Honorable Tom Daschle
Democratic Leader
United States Senate
Washington, D.C. 20510

Dear Senator Daschle:

The Administration supports marriage penalty relief, and has proposed a
targeted and fiscally responsible plan in the budget to provide it.
However, the Administration strongly opposes the marriage penalty relief
bill that passed the House this afternoon.  If this bill is sent to the
President in its current form, his senior advisers will recommend that he
veto it.  This bill would cost more than $280 billion and be more expensive
than either the House or the Senate bill over ten years.  Together with the
other tax legislation passed by the Congress this year, it would threaten
our fiscal discipline and jeopardize our ability to strengthen Social
Security and Medicare, pay down the national debt, enact well-targeted tax
cuts, provide a long-overdue voluntary Medicare prescription drug benefit,
and meet other pressing national priorities.

Our current strong fiscal position reflects both difficult choices and an
honest approach to budgeting.  The package of bills working their way
through Congress would subvert the fiscal discipline that has helped to
fuel the economic growth of the past eight years.  The tax bills passed in
the Congress are now approaching the size of the large tax bill that the
President vetoed last year, and threaten our ability to pay down the debt
and strengthen Medicare and Social Security.  Furthermore, focusing on
five-year estimates masks the true size of the tax cuts, which would drain
the surplus just as the baby boom generation moves into retirement.

Fiscal discipline has been critical to the prosperity we enjoy today, and
to the prospect of budget surpluses that we now project for years to come.
But projections are inherently uncertain.  This is not the time to abandon
our path of fiscal discipline.  Congress should provide a thorough
accounting of how much it intends to spend this year.

Moreover, the House bills would primarily help those Americans who have
already benefited most from our strong economic expansion, rather than
focusing on working families.  The total tax savings that would accrue to
the 1 percent of Americans with the highest incomes would exceed those
provided to the bottom 80 percent.  This amounts to an average tax cut of
about $16,000 for each family in the top 1 percent and less than $200 for
each family in the bottom 80 percent.

Unfortunately, the conference marriage penalty bill is poorly targeted.
Less than half of the cost of the bill would go to those who actually have
marriage penalties. Moreover, although the cost of the bill appears
relatively moderate because it includes a provision to sunset it after five
years, it is wholly unrealistic to imagine Congress allowing marriage
penalty relief to expire.  As noted, the ten-year cost of this bill alone
would be more than $280 billion.

In contrast, the President?s tax cutting proposals would maintain our
fiscal discipline while providing meaningful tax relief to a broad spectrum
of low- and moderate-income families.  Our budget proposals would provide
significant marriage penalty relief targeted at those families who actually
suffer penalties, and tax incentives for retirement savings targeted at the
75 million Americans who lack pension coverage.  We have also proposed tax
credits to assist families with their long-term care and child care needs,
as well as tax incentives to repair and build schools and improve the
environment.  Two-thirds of the benefits of the major tax proposals in our
budget would accrue to the middle 60 percent of the income distribution.
We also support targeted estate tax relief that addresses inequities
created under the current system.

Notwithstanding our concerns with this and other tax bills that together
total over $700 billion, the President has offered to sign marriage penalty
relief costing about $250 billion over 10 years if the Congress passes a
plan that preserves the Medicare surplus to pay down the debt and passes a
plan that gives real, voluntary Medicare prescription drug coverage that is
available and affordable for all seniors.  This balanced approach would
ensure that we are taking prudent steps to allocate the surplus toward
meeting the real needs we face, while maintaining fiscal discipline.

The Administration would like to work with Congress in the remaining days
of this session to enact meaningful legislation that addresses the
priorities of the American people.  Our focus should be on strengthening
Social Security and Medicare, enacting well-targeted tax cuts that maintain
fiscal discipline, paying down the debt, and addressing other national


                                         Lawrence H. Summers

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