NCPA - National Center for Policy Analysis

A Myriad Of Targeted Tax Credits

January 15, 1999

Last year's budget proposal included targeted tax cuts totaling $24 billion over five years. This year's total is expected to be about $35 billion over five years. But these are not broad across-the-board cuts. They are small, focused breaks benefiting certain kinds of taxpayers.

Observers say the White House has been announcing cuts almost daily as the President's State of the Union message draws near.

  • There is a credit for people providing home care to disabled relatives and another break for steel makers besieged by imports.
  • Businesses that help immigrant employees learn English are on the list, along with small businesses that start providing health-care insurance to their employees.
  • President Clinton reportedly will announce today a new tax-credit proposal designed to encourage investors to channel funds to distressed urban and rural communities, and a credit of up to $4,000 for Americans who buy extra- fuel-efficient cars is likely to be introduced soon.
  • Even Vice President Al Gore is getting into the act with a recent proposal to give a break to people who buy bonds that finance parks to make the suburbs more "livable."

Critics say such tax code tinkering allows the government to tie behavioral strings to the income of families. Others complain that it further complicates an already cluttered tax code.

In 1986, Congress passed and President Reagan signed a tax-reform law that swept away a morass of special tax breaks and also lowered taxes across the board. Now, tax reformers lament, Clinton is steadily chipping away at that singular accomplishment.

Source: Jacob M. Schlesinger, "With Spending Curbed, Tax Credits Help Fulfill Part of Clinton's Agenda," Wall Street Journal, January 15, 1999.


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