July 31, 1997 - Ninth District Congressman Adam Smith voted today for H.R. 2014, the Taxpayer Relief Act, which provides a net cut in federal taxes of $95.2 billion over five years.

The tax cut package completes House approval of the balanced budget deal negotiated by President Clinton and the Congress.

"I think it's important to show people that Congress can and will cut taxes when appropriate," said Smith. "Democrats and Republicans really worked together on this package, and I think it's exactly the kind of common sense, pragmatic approach to solving problems that the people of this country want."

Major provisions in the tax cut package include:

• Per-Child Tax Credit — The agreement provides a $500 per-child tax credit for children under age 17 whose parents earn up to $75,000 for singles and $110,000 for married couples. The credit is partially refundable (i.e. payable to the parents even if they owe no income tax) against payroll taxes for lower-income families with three or more children.
• Education Tax Incentives — The bill establishes a "HOPE" scholarship that gives students a tax credit for the first two years of college worth 100% of the first $1,000 of their tuition and 50% of their second $1,000. In the third and fourth years of college the credit is worth 20% of $5,000 of tuition expenses each year. The agreement also allows individuals to contribute tax-free to prepaid tuition plans, and creates an education individual retirement account, under which families would be able to contribute up to $500 per child per year.
• Capital Gains Tax Cuts — The agreement cuts the maximum capital gains tax rate to 20% from the current 28% for investments held at least 18 months. After 2000, the maximum rate would fall to 18% for assets held for five years. The agreement also reduces the rate for lower income individuals from 15% to 10%, and 8% for assets held more than five years. The agreement also increases from $125,000 to $250,000 ($500,000 if married) the tax exemption for gains on the sale or exchange of a principal residence.
• Estate Tax Cuts — The bill gradually increases the amount exempt from the unified gift and estate tax to $1 million from the current $600,000. The bill also provides an immediate increase to $1.3 million in the estate tax exemption threshold for family farms and family-owned businesses.

"Most importantly, the tax cut does not put a balanced budget by the year 2002 at risk," explained Smith. "We've got to get our fiscal house in order, and I wasn't going to support any tax cut that would explode the deficit."

"If we're going to give a $95 billion tax cut, I'm going to make sure that it goes to middle class, working families," said Smith. "They have been working hard for the last 16 years, and they need the tax cut more than people making half a million dollars or more."

"Finally, the education tax credits are very important, because they help provide access to higher education and make it more affordable for middle class families to send their children to college," said Smith. "Education is the key to economic opportunity, and it must be a top priority."

The Taxpayer Relief Act, combined with the Balanced Budget Act passed yesterday, will balance the budget by the year 2002.