Clinton To Unveil New Tax Cut Plan

From CNN White House Correspondent John King

WASHINGTON (AllPolitics, June 29) -- President Bill Clinton will put a new tax cut plan on the table Monday morning, offering an alternative to plans already passed by the House and Senate.

CNN has learned that the new Clinton plan, drafted over the weekend at Camp David, will include a $500 per child tax credit for children up to 17, a cutoff in line with Republican proposals. But Clinton will propose limiting the credit to families making $75,000 or less annually. The Republican cutoff is $110,000.

Sources say Clinton will also embrace the Senate's call for a 20-cent increase in cigarette taxes. But he will ask for stronger language to make sure the money will be dedicated to children's health programs.

The president also plans to rewrite his proposed $35 million package of education tax benefits to incorporate favorite ideas from both parties. Sources say the new plan will include:

• Tax credits of up to $1,500 for college tuition costs
• Tax deductions of up to $2,500 for interest on student loans
• Tax credits for small businesses that help employees with education costs
• Penalty-free IRA withdrawals for education expenses

Clinton also wants to give $500 per child to poor families who don't make enough to pay federal taxes. Republicans are reacting coolly to that idea, saying it would amount to welfare and would be unfair to middle-class families.

Sources tell CNN that Clinton will also offer new ideas for cutting capital gains and estate taxes. Among those proposals:

• Preferential treatment for investments in new high-tech ventures
• Exempting the first 30 percent of an investment gain from taxation

However, Clinton reportedly won't propose indexing capital gains taxes for inflation -- a key demand of House Republicans. Clinton rejected the idea as too expensive.

GOP leaders say they will consider the new Clinton plan, but they say Clinton needs to remember Republicans control Congress and have a key role in shaping an agreement.

"I hope he doesn't start drawing lines in the sand," said Sen. Don Nickles, R-Okla.

Clinton will pitch his new plan as a better deal for middle-class families. And while some Democrats think the White House is in too much of a rush to compromise with Republicans, Clinton and his aides are working to bridge differences with the GOP.