House OKs eliminating tax code> New system required by July 4, 2002

WASHINGTON — In an election year attempt to jolt the tax reform debate, the House passed a bill that would eliminate much of the nation’s income tax code by 2003.

The House voted 219-209 to approve the Republican-backed Tax Code Termination Act. It would eliminate the current tax code — except for Social Security payroll taxes — on Dec. 31, 2002, so long as Congress passed some kind of simplified replacement tax system by July 4, 2002.

Maine Reps. John Baldacci and Tom Allen voted against the bill.

The Clinton administration and Democrats denounced the measure as an irresponsible “gimmick” that taps into the public’s anger with the IRS. There was little subtlety in the House floor debate.

“It is pandering, pandering in the worst conceivable way for a few votes in an election year,” said Rep. Forney “Pete” Stark, D-Calif. Chimed in Rep. Ken Bentsen, D-Texas: “This is the most ridiculous thing I have ever seen.”

Magazine publisher and likely GOP presidential candidate Steve Forbes, a strong proponent of the plan, praised the House vote.

“It indicates that this fight is no longer a one-man crusade against high taxes and IRS corruption,” Forbes said. “It has become a national movement and it’s gaining momentum.”

President Clinton promised he was “going to do my best to beat it.”

“Because if you voted to get rid of it without saying what the replacement was, you would put individual Americans and families in an uncertain position about their investments and health insurance,” Clinton said. His advisers are strongly recommending a veto.

Referring to the economic crisis in Asia, Clinton said, “The last thing in the world we need to do right now is to send some signal of instability, that we decided to get rid of our whole tax code without knowing what the replacement would be.”

The bill’s defenders tapped into the public’s antipathy against the tax code, now so large and complex that nearly 60 million taxpayers pay for professional tax preparation help each year.

“It forces Congress to quit talking about comprehensive tax reform and start doing something about it,” said Rep. Steve Largent, R-Okla., the bill’s main sponsor.

The bill’s prospects in the Senate are uncertain. On April 2, the Senate passed a similar scrap-the-tax measure, but it was only an advisory measure.

But after the House vote, Senate Finance Chairman William V. Roth Jr., R-Del., cited “serious concerns about sunsetting the tax code without an alternative in place.”

“We need to reach a consensus on reforming the tax code, and unfortunately, we are not there yet — even within our own party,” Roth said. “Let’s not put the cart before the horse.”

The two leading GOP tax reform proposals are a 17 percent flat tax, sponsored by House Majority Leader Dick Armey, R-Texas, and a 15 percent national sales tax, sponsored by Rep. Bill Tauzin, R-La.

Tauzin and Armey have crisscrossed the country since last fall debating their plans, hoping to build grass-roots momentum. But Congress’ tax writing committees aren’t planning to work on tax reform this year.

“Why isn’t the Republican leadership bringing up real reform?” asked Rep. Ben Cardin, D-Md.

House Speaker Newt Gingrich, R-Ga., strongly defended the bill as a necessary first step toward fundamental tax reform. He vividly described the political difficulty for opponents of the bill.

“Then you go back home to your small-business man and your small-business woman and you tell them why you didn’t want to help relieve them of the tax burden and … all of the attorneys fees and all of the accounting fees,” Gingrich said. Fifteen Democrats and 204 Republicans voted for the measure. Voting no were 188 Democrats, 20 Republicans and one independent.

Earlier, Gingrich spoke at a rally from the bed of a flatbed trailer in front of the Capitol, surrounded by boxes containing 750,000 signatures from small businesses to support repeal of the graduated income tax. The petitions were gathered by the National Federation of Independent Business, an influential lobby group that began a national campaign to scrap the code last fall.

Treasury Secretary Robert Rubin predicted the bill, if it became law, would have drastic consequences for the economy. Homebuyers wouldn’t know how much to pay for a house because of questions about the future of the mortgage interest deduction. Businesses wouldn’t know if they could deduct depreciation for new capital investment.