Download Special Report No. 84
Special Report No. 84
Executive Summary President Clinton’s newly proposed budget plans on a steadily growing series of budget surpluses over at least the next ten years. To ensure the surpluses, the Administration plans to hold the line on most types of federal spending while increasing the current record peacetime level of federal taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ation.
Ostensibly to bolster the failing Social Security and Medicare programs, the Clinton plan would use more than three quarters of the projected surplus to reduce federal debt. Another 12 percent would be used to fund private savings accounts, and the balance would fund new spending initiatives.
Some programs would see an increase over the next five years, notably education and training programs as well as funding for roads and other transportation projects. The budget also calls for additional spending for more teachers, after-school programs, and Head Start. The Administration’s plan to use surplus funds to pay down the national debt would significantly lower interest expenses while entitlement spending remains essentially unchanged under the plan.
On the revenue side of the ledger the Clinton plan contains a mix of tax and fee increases as well as a host of tax credits. These would, on net, boost federal revenues by $45.8 billion over the next five years. Revenue raisers include a 55-cent-per-pack hike in the federal cigarette tax and higher corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. es. The revenue reducers are a myriad of tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s that would subsidize activities ranging from long-term medical care to first-time home purchases in the District of Columbia.
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