Forget amendment, and get on with tax cut

This week marks the president’s State of the Union address and presentation of the administration’s budget, framing the 1997 governmental goals. With Congress starting its session on January 7th, the question on everyone’s minds is, What will be accomplished in Washington this year?Obviously, one issue that will take lots of the time and attention is an approach to a balanced budget. Republicans will want to spend their time crafting a balanced-budget amendment. Democrats will answer by suggesting that a balanced budget is doable through the legislative process. Just give them the next five years to get it done.
Whether Congress settles on an amendment, or the executive branch pushes a legislative solution, the people have largely decided that neither approach presents what is most needed.
Any amendment will not be able to control entitlements and will probably be silent with respect to war and national emergencies. Thus, after endless debate, crafting an amendment to pass both the House and Senate, then to be ratified by 38 states, is an exercise in futility. Such a process would likely consume six years and never address how to deal with the looming bankruptcy of Medicare and Social Security trust funds.
The approach to a balanced budget through the legislative process is fraught with pitfalls. During the 104th Congress, the Clinton administration proposed a seven-year plan to balance the budget.
Unfortunately, its foundation was smoke and mirrors. It contained optimistic revenue projections, low-interest-rate assumptions, unrealistic spending limits imposed by smaller cost-of-living adjustments, and numerous accounting manipulations until the sunset of the Clinton administration. To balance a budget without systemic changes to the expenditure side of the budget equation is a worthless process.
Instead of spending countless hours debating methods for balancing the budget, Washington needs to address a capital-gains tax cut. Reducing the capital gains tax rate by 50 percent – and including a capital gains adjustment as part of the alternative tax calculation – will be the one item to spur our economy.
Not only will taxpayers be able to sell capital assets with lesser tax consequences but the national economy also will receive a major stimulus. Both 1997 and 1998 tax revenues are forecast to increase dramatically because of pent-up selling decisions from nine years.
Instead of attempting to pass a balanced-budget amendment, Congress and the administration should use the time before the Easter recess to pass a package of tax cuts. A $300 per child tax credit and an itemized deduction for college tuition payments should be forged with a capital-gains tax reduction.
Delay in bringing this package forward cannot be tolerated. The more months that go by in 1997, the louder will become the bureaucrat’s cry to postpone capital-gains reduction until 1998 because of revenue losses from transactions already incurred. Action now is important to prevent increasing cynicism across the nation.Former Fort Collins mayor John Knezovich is a certified public accountant.ÿ