Statement of Administration Policy: The "Ways and Means Democratic Alternative" to the Omnibus Reconciliation Act of 1990

(House Floor)

The "Ways and Means Democratic Alternative" relies principally on increases in income taxes for people in all brackets. Delaying the indexation of tax rates for inflation will increase the income taxes paid by middle class familites — hardly an argument for fairness. In addition, there is nothing in the package to encourage economic growth, the driving force behind increases in the standard of living for all Americans. Because of these serious flaws, the president's senior advisors would recommend that he veto the "Ways and Means Democratic Alternative" if it were presented to him for his signature.

The "Ways and Means Democratic Alternative" includes a $93.6 billion across-the-board income tax increase. Specifically:

— The proposal reduces the tax benefits of the personal exemption by removing indexing far inflation. This will increase taxes on everyone except the wealthiest one million taxpayers who lost their personal exemptions in the 1986 tax bill.

— The "Ways and Means Democratic Alternative" brings back bracket creep with a vengeance. Since World War II every taxpayer was subject to ever-increasing taxes through inflation. Bracket creep was the favorite tool of the tax and spenders. It was stopped in 1985 with indexing of personal exemptions and tax brackets. By reversing this policy, the "Ways and Means Democratic Alternative" brings back silent rate increases for everyone. This provision raises; $36 billion over 8 years, largely on the backs of low and middle-class income families. This is advertised as a "one-year tax increase." What will keep the Democratically-controlled Congress from repeated extensions?

— It increases income taxes for people in all brackets.

A married couple with two children, who have taxable income of $34,000 in 1991 would pay income taxes of $5,100 under current law. Under the no-indexing provision of the "Ways and Means Democratic Alternative," they would pay $5,410.50, an increase of $313.50, more than six percent.

A single person with no dependents who has taxable income of $21,000 in 1991 would pay income tax of $3,150 under current law. Under the no-indexing provision of the "Ways and Democratic Alternative," that person would pay $3,301.50, an increase of nearly five percent.

— These tax increases are permanent. Even if indexing is delayed for just one year, the increase will apply for every year thereafter.