Former GOP vice presidential nominee Jack Kemp is urging Congressional tax-writing committees to quadruple proposed tax cuts in the budget agreement, so as to spur economic growth and wipe out the budget deficit. He wants Congress to follow up on the Contract With America promise of $350 billion in tax cuts, and finds it curious that only modest tax cuts were contained in the agreement, even after the Congressional Budget Office announced that it had underestimated revenues by some $225 billion.

Here are some of the features of his proposal:

• First, Congress should set a dollar figure for the expected level of tax receipts in 1997 and 1998 and -- to the extent that revenues exceed those levels -- it should embark on a new round of tax rate reductions.
• Congress must insist that the CBO set up a process to provide new economic assumptions in light on proposed improvements to the tax system.

• Tax-writing committees should consider eliminating -- or at least halving -- capital gains and estate taxes, and indexing them for inflation.

• Consider repealing the 1993 ten percent income tax rate surcharge and give low- and middle-income workers relief by allowing deductibility of payroll taxes for Social Security and Medicare.

Despite record tax receipts, the budget process still keeps most windfall tax revenues inside the Beltway. Spending continues to grow faster than the economy, runs well above the Democrats' super-spender 1993 budget and because of the 1996 spending spree means government is growing rapidly even while claiming "cuts."

Kemp points out that the $225 billion windfall demonstrates that economic growth can easily produce massive new revenues. A better tax code would do the same, permitting not only a tax cut but an earlier balanced budget.

Source: Jack Kemp, "How to Break Out of the Budget Trap," Wall Street Journal, May 6, 1997.