 National Association of Counties * Washington, D.C. Vol. 31, No. 15 * August 9, 1999 Previous story | Table of Contents | Next story Tax bill postponed 'til after recess Contains NACo-sponsored provisions on tax exempt bonds By Ralph Tabor
The House and Senate were expected to approve along party lines a compromise $800 billion tax-cutting bill last week. The details of the legislation were worked out by the Republican leadership and a small House Senate conference committee. The compromise bill contains a number of NACo-sponsored provisions on tax-exempt bonds. The legislation, however, would be held up and not sent to President Clinton until Congress returns in September. The president has made it clear that he will veto any version that costs more than $300 billion in projected lost revenues. The $800 billion tax legislation supposedly is driven by budget surplus forecasts of more than $3 trillion over the next 10 years. Roughly $2 trillion would be gained from payroll taxes, and Congress and the Administration agree these revenues should be preserved for Social Security and Medicare. Most of the other $1 trillion would be used for tax cuts spread over 10 years. While similar budget projections were made by both the Congressional Budget Office (CBO) and the White House Office of Management and Budget (OMB), it is the first time that 10-year forecasts have been used as the basis for a large cut in taxes. In the past, even five-year budget projections have been treated skeptically by many economists because of the track records of CBO and OMB. Recently, both agencies have had difficulty in correctly forecasting revenues and expenditures for the next fiscal year, let alone five years or 10 years. Many budget analysts are particularly critical of the 10-year $3 trillion surplus because it assumes that federal spending will adhere to the spending ceilings adopted by Congress in 1997. Last year, Congress and the White House agreed to an omnibus appropriations bill for FY99 that exceeded the spending caps by $22 billion. It is clear that the final appropriations for FY00 will be even higher than this fiscal year. Bond provisions The final legislation provides some relief from arbitrage rebate requirements for school construction. The bill would lengthen the arbitrage rebate spend-down requirement for school bonds from four years to two years. Another provision would increase the arbitrage rebate exemption for small issue school bonds from $10 million to $15 million. While the arbitrage rebate changes affect only schools, efforts will be made in the future to expand the provisions to all governmental bonds. The conference bill gradually increases the low income housing tax credit from its current $1.25 per capita to $1.75 for each state. The new state caps would be phased in starting Jan. 1, 2000. In addition, a Senate proposal to allow up to $15 billion in tax-exempt private-activity bonds for up to 15 pilot surface transportation projects was included in the final bill. The authority would be outside current private-activity volume caps. |