WASHINGTON -- Rep. Beryl Anthony yesterday lashed out at the Bush administration's plan to stimulate economic growth by creating family savings accounts and urged the President to modify the proposal so that it would not hurt demand for tax-exempt bonds.
The Arkansas Democrat's comments came during the first of four days of tax hearings being held by the House Ways and Means Committee that are designed to set lawmakers on a path toward drafting a major tax bill in 1992 that stimulates economic growth and cuts taxes for the middle class.
Although the President intends to wait until January to unveil a comprehensive growth package, Office of Management and Budget Director Richard Darman told the panel yesterday that Mr. Bush will continue to push for a variety of proposals he has already made to stimulate growth, including a plan for the creation of family savings accounts.
Under President Bush's plan, the interest on deposits to those accounts would be exempt from federal tax if the principal remained in the account at least seven years. Contributions to the account would be made in after-tax dollars, unlike Individual Retirement Accounts, where contributions are tax-deferred up to a certain level of income.
Municipal market participants have said they were concerned the family savings account would draw individual investors away from tax-exempt bonds by creating a sort of "super" Treasury investment that would carry a higher rate than municipals and be exempt from federal taxes.
During yesterday's hearing, Rep. Anthony said his analysis of the family savings account shows that whatever economic growth it would stimulate would be offset by the damage done to demand for municipal bonds. "You will hurt market-ability and drive costs up" for tax-exempt bond issuance, he said.
"This is going to hurt state and local governments' ability to invest in future infrastructure needs," Rep. Anthony said, "It appears to me this is just not a wise idea at this particular time.
Mr. Darman did not respond directly to Rep. Anthony's criticisms of the savings plan, but said instead he "would hope we could get to where . . . instead of just criticizing [savings plans], we could get to one we can support."
But Rep. Rostenkowski urged Mr. Darman to listen to Rep. Anthony's comments, saying "the analysis by Mr. Anthony is worthwhile and something you should benefit from."
Another growth incentive on the President's list continues to be the permanent extension of the research and development tax credit, according to Mr. Darman and Treasury Secretary Nicholas Brady.
Under current law, the credit expires at the end of this month, but President Bush is expected to sign legislation that would extend the credit for another six months, throughn June 30, 1992. The legislation also contains six-month extensions for the tax exemptions for mortgage revenue bonds and small-issue industrial development bonds.
The President's intention to keep pushing for a permanent credit for research and development likely means that all the expiring provisions -- including the bond exemptions -- will be on tax lawmakers' minds as they draft tax legislation next year. Rep. Rostenkowski has promised that all the tax breaks will be scrutinized next year with an eye toward making some of them permanent and allowing others to die.
Both Rep. Rostenkowski and the President's advisers who testified yesterday said they wanted to put aside partisan bickering and find common ground that would allow them to enact a tax package next year.
"This is going to have to be a bipartisan effort," Mr. Darman said. "We've got to put all this foolishness aside, let's say as of 10:00 this morning . . . and move on down the road."
Mr. Rostenkowski noted that some have predicted the hearings would be a "political circus," but he added, "that's not what these hearings are about." Instead, he said he hopes they "will put us on the path to broad tax legislation in 1992."
The Senate Finance Committee will hold tax hearings Dec. 12 and 13. The Ways and Means hearings continue today and then again on Dec. 17 and 18.