By Any Reasonable Test - a Middle-Class Tax Cut

In 1992, then-candidate Bill Clinton campaigned on the promise of a middle-class tax cut. In 1993, President Clinton passed the largest tax increase in US history. In 1994, Republicans campaigned on the Contract With America, which promised broad-based tax relief. In 1995, the Republican majority passed a balanced budget with tax relief, only to see it vetoed by the president. Finally, this year, the president and the Congress agreed to provide the American people with much-needed tax relief - in the context of a balanced budget.

Two weeks ago, congressional Republicans passed a bill of broad-based tax cuts:

Education credits. The bill contains $3,000 in tax-credits relief for the first two years of college, or $10,000 per year in tax deductions for tuition. This provision is, in fact, the highlight of the president's education initiative unveiled in his State of the Union address. More than 40 percent of the $85 billion in tax cuts goes to education tax credits.

Death taxes. Republicans don't believe you should have to visit the IRS agent the same week you visit the undertaker. We have crafted an increase in the amount of income exempted from inheritance taxes from $600,000 to $1 million. This relief in what amounts to a "death tax" is a benefit primarily to thousands of small-business owners and farmers who risk losing a family business to an onerous tax liability after the death of a relative.

Savings and investment. As the baby boom generation grows up, individuals have increasingly gotten involved in the stock market. In the last three years, the market has doubled in value. This tax cut benefits not just the wealthy but middle-class baby boomers increasingly invested in 401(k)s and mutual funds - today, 43 percent of Americans invest in stocks or mutual funds - as well as average home sellers whose "gains" are largely the result of inflation. Most significantly, this frees up much-needed capital to keep the economy growing and creating new jobs.

Per-child tax credit. Finally, the crown jewel in the tax-cut treasure chest: a tax credit of $500 per child 17 or younger for families earning less than $110,000 per year. The credit, benefiting millions of families, would be $400 next year, rising to $500 thereafter. Parents of a child born this year would save more than $10,000 by the time the child turns 18. This is the epitome of middle-class tax relief.

Congress's Joint Economic Committee calculates that three-quarters of the bill goes to families making $76,000 per year or less. More than 90 percent of the tax relief goes to families making less than $100,000.

Anyone seriously wishing tax relief could hardly argue with this attractive package for the American people. Unfortunately, the president seems to be backing away from the very middle-class tax cut on which he campaigned. He allows his Treasury Department to adopt arcane, peculiar, and downright deceptive analyses of income that overstate what middle-class families earn; takes money from taxpayers to award it to those who pay no taxes; and then suggests that the Republican bill favors the wealthy!

The Clinton administration does this in three ways:

First, by including in its income calculations people who pay little or no taxes. They are already receiving grant money such as the Earned Income Tax Credit. To give those individuals money, when they don't pay federal taxes to begin with, is welfare. We don't think a tax-cut bill designed to help people who pay taxes should be turned into a welfare bill.

Second, by overestimating family income, the Treasury Department has suddenly made rich millions of Americans who would undoubtedly be surprised to discover they are. For example, the department is now estimating the "imputed rent value" of a home as part of family income. In other words, if you own a house that would rent for $1,000 a month, they add $12,000 to your income in figuring out these tables. By "cooking the books," the Treasury Department pushes up the income estimates of the average family and, in the process, reclassifies who is or isn't rich.

Finally, the department has withheld data clearly showing that, even after the across-the-board tax reduction, the share of the tax burden borne by each income group is unchanged. The top fifth of the wealthiest Americans will pay 63 percent before and after tax reduction. The share borne by the bottom two-fifths remains at 5 percent.

Independent observers recognize the Republican bill as legitimate tax relief for the middle class. Even the Atlanta Journal-Constitution, a paper with a traditionally liberal editorial page, analyzed the major provisions of the House-passed plan and applauded that Congress would, "for the first time in 16 years, give a significant tax break to an overburdened middle class."

All the administration's financial game-playing merely hides the truth: The Republican-passed tax bill is the fulfillment of what President Clinton promised - a middle-class tax cut. The president should direct his Treasury Department to provide honest figures so we can all quickly get to work. The American people have waited long enough.

* Newt Gingrich (R) of Georgia is Speaker of the US House of Representatives.