The Heritage Foundation

News Releases on Taxes

August 24, 1999

August 24, 1999 | News Releases on Taxes

Tax-Cut Plan By House Conservatives Would Promote Fairness, Preserve Economic Boom, Analyst Says

WASHINGTON, JUNE 24, 1999-The American Values Tax Savings Act of 1999, introduced today by a group of conservative House members, would lead to a fairer tax system, help extend America's record economic expansion and pave the way for fundamental tax reform, a Heritage Foundation economist said today.

"At least some members of Congress understand that America's tax code remains biased against marriage, savings and success," said Heritage economist William Beach. "The leadership should use this plan as a model when they put together a tax-relief package for this year."

Of the 11 components in the proposal, crafted by the Conservative Action Team (CATs), six were recommended by Beach in an April 13 study that spelled out how Congress can return the budget surplus to the American people. They are: elimination of the marriage penalty; elimination of the estate tax; cutting the capital-gains tax rate in half; allowing workers to "roll over" part of their pre-tax wages earmarked for medical expenses; extending the same tax breaks to families who send their children to private colleges as those who opt for public colleges enjoy; and raising the limit on the value of a pension that can be converted from a traditional IRA to a tax-deferred Roth IRA.

Repealing the marriage penalty is an issue of basic fairness, Beach says. "It's wrong for the government to force married couples to pay more in taxes than couples who simply live together," he says.

The estate tax, meanwhile, often forces the children of small-business owners to sell the business just to pay the tax bill. "The death of a parent is tragic enough without the children having to forfeit what their parents spent a lifetime to build," Beach says. "Death should not be a taxable event."

Capital-gains tax cuts are necessary to help keep the American economy running in high gear, Beach says. "The economic boom of the 1990s has been fueled by entrepreneurs who take risks in exchange for the prospect of healthy rewards," he says. "This is behavior the government should encourage."

Beach's April 13 paper recommended tax relief worth $755 billion over 10 years. The CATs plan would provide 10-year tax cuts of $778 billion. Both plans would preserve 100 percent of the Social Security surplus.

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