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By Cynthia L. Moore, NCTR Washington Counsel

Will there be a Tax Bill? (There Had Better Be – Otherwise We Don’t Get Any Pension Legislation)

Congress passed H.R.2488, the Taxpayer Refund and Relief Act of 1999, as it left town a few weeks ago. The bill includes NCTR-supported pension portability provisions. It would provide $792 billion in tax relief, including a one percentage point cut in all income tax rates, and is funded primarily from federal budget surplus. Congress has not sent the bill to the President yet, but when it does so, he is expected to veto it. Despite the veto, we think the legislation may be resurrected The President supports the issue, but in the form of targeted cuts of about $300 billion – far less than H.R.2488’s price tag. The President may be willing to deal if he can get Congress to go along with Medicare reform (see below). If a second tax bill is negotiated, pension provisions will likely be included because they enjoy bipartisan support and are relatively inexpensive.

Good Medicine? A Prescription Drug Feature for Medicare.

The President has proposed adding drug coverage for all Medicare beneficiaries. The Republican leaders in Congress are interested, but would tailor it to lower income beneficiaries only. Also being considered (though not by the President) is a dramatic proposal by Sen. John Breaux (D-LA) and Rep. Bill Thomas (R-CA) to convert Medicare to a "premium support" program. Beneficiaries would receive a payment from the federal government and then apply it to a plan of their choosing. The plans would include HMO’s and fee for service. Beneficiaries would make up any difference in cost. It is modeled on the existing health care plan for federal employees.

And While We’re Talking about Drugs, What about that Poison Pill of SS Reform, Privatization?

Although all bets were on SS reform in early 1999, efforts have now sputtered to a halt because of the "privatization issue." On the surface, privatization seems like a no-brainer solution – just invest part of the SS trust fund in the stock market and make more money than the trust fund currently earns from government bonds. The solution seems far more palatable than hiking the payroll tax, cutting benefits, or raising the retirement age. But a vast chasm of disagreement on privatization exists. Most Republicans think that privatization should be accomplished through having each American worker invest part of their SS money in an individual account. They premise their views on the idea that the federal government cannot be trusted to invest the money in a non-political fashion. Most Democrats think that some federal entity should invest the money because individual Americans don’t have the skills or desire to invest the money. Because of the controversy on privatization, no SS reform is likely this year. That’s good news for opponents of mandatory SS coverage, including a number of NCTR-member systems whose participants are not covered by SS.