WASHINGTON - White House Spokesman Marlin Fitzwater declared Friday President Bush will veto the urban aid tax bill, ending nearly a month of speculation in the municipal bond community over what action the President would take on the measure.
Fitzwater's announcement, nude aboard Air Force One and confirmed by the White House, came as Congress was preparing to deliver the bill to the President.
Congress passed the bill Oct. 8 but dragged its feet in sending on the Package so that Bush could quietly sign the controversial measure after the Nov. 3 presidential election. Under the Constitution, the President has 10 days to act on legislation once he receives it.
But that strategy was undercut when The Washington Post revealed it in a front-page story last week, several lobbyists said.
"All the attention is putting the President in a box," said a lobbyist for local government. "The President can't afford to let things slide until after the election."
Bush has tried to paint Gov. Bill Clinton of Arkansas, the Democratic presidential nominee, as someone who would raise taxes and who continually changes his position on issues. To avoid having the same label applied to him, the President will have to quickly veto the tax bill, lobbyists said.
"Failing to veto it [quickly) would send a signal he doesn't want to send," said a lobbyist. "His whole issue is, ~Clinton's going to raise your taxes.'"
Until the Post article appeared Wednesday, the tax bill had received scant attention after being given final approval by Congress.
"Everyone was hoping it would disappear for a while," allowing him to sign it quietly without prompting criticism he was raising taxes, a housing lobbyist said. Now, "the reality is he's not going to sign this bill."
Because of the expected veto, the mortgage bond and IDB exemptions, which expired June 30, would probably remain in limbo well into next year, municipal lobbyists have said. Congress is not likely to pass another bill containing extensions of those tax breaks until late in 1993, they said.
If the President were to sign the bill, issuers could immediately begin issuing tax-exempt mortgage revenue bonds and small-issue industrial development bonds. Provisions in the urban aid bill would make the mortgage bond exemption permanent and extend the IDB exemption through Sept. 30, 1993.
A third option for the President is to take no action on the bill. Normally, a President's failure to sign or veto a bill means that the bill becomes law automatically at the end of the 10-day period. But because Congress has adjourned for the year, inaction by the President would amount to a so-called pocket veto and the bill would die.
Proponents of the measure have tried to keep up pressure against a veto. Their latest effort came Thursday, when USA Today published a full-page advertisement signed by 59 organizations urging Bush to sign the bill.
The groups told Bush in the ad that signing the bill would create more than one million jobs annually and "is consistent with your pledge to the American people; it is not a tax increase; in fact, unless you sign [the tax bill], the taxes of many Americans will significantly increase," the ad states. The 59 organizations include the Association of Local Housing Finance Agencies, the National Council of State Housing Agencies, and the National Community Development Association.
The core of the $27 billion package is a proposal to create urban enterprise zones, economically depressed areas in which tax incentives would be offered to start up companies or lure existing firms from other areas. The proposal would ease tax law curbs on qualified redevelopment bonds so they could be issued in the zones.
Also in the package is a provision that would expand the supply of bank-qualified bonds. Under current law, banks may deduct the cost of carrying tax-exempt bonds from issuers who expect to sell no more than $10 million annually. The bill would increase that amount to $20 million.
In addition, the bill would lift the $150 million cap on the amount of tax-exempt bonds that individual 501(c)(3) organizations may have outstanding at any one time.