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Posted on: August 26, 2017 at 00:46:39 CT

In proposing a plan to cut the deficit, Clinton submitted a budget and corresponding tax legislation that would cut the deficit by $500 billion over five years by reducing $255 billion of spending and raising taxes on the wealthiest 1.2% of Americans.[5] It also imposed a new energy tax on all Americans and subjected about a quarter of those receiving Social Security payments to higher taxes on their benefits.[6]

Republican Congressional leaders launched an aggressive opposition against the bill, claiming that the tax increase would only make matters worse. Republicans were united in this opposition, and every Republican in both houses of Congress voted against the proposal. In fact, it took Vice President Gore's tie-breaking vote in the Senate to pass the bill.[7] After extensive lobbying by the Clinton Administration, the House narrowly voted in favor of the bill by a vote of 218 to 216.[8] The budget package expanded the Earned Income Tax Credit (EITC) as relief to low-income families. It reduced the amount they paid in federal income and Federal Insurance Contributions Act tax (FICA), providing $21 billion in relief for 15 million low-income families.

Clinton signed the Omnibus Budget Reconciliation Act of 1993 into law. This act created a 36 percent to 39.6 percent income tax for high-income individuals in the top 1.2% of wage earners. Businesses were given an income tax rate of 35%. The cap was repealed on Medicare. The taxes were raised 4.3 cents per gallon on transportation fuels and the taxable portion of Social Security benefits were increased.

Clinton enacted Small Business Job Protection Act of 1996 which reduced taxes for many small business. Furthermore, he signed legislation that increased the tax deduction for self-employed business owners from 30% to 80% by 1997. The Taxpayer Relief Act reduced some federal taxes. The 28% rate for capital gains was lowered to 20%. The 15% rate was lowered to 10%. In 1980, a tax credit was put into place based on the number of individuals under the age of 17 in a household. In 1998, it was $400 per child and in 1999, it was raised to $500. This Act removed from taxation profits on the sale of a house of up to $500,000 for individuals who are married, and $250,000 for single individuals. Educational savings and retirement funds were given tax relief. Some of the expiring tax provisions were extended for selected businesses. Since 1998, an exemption could be taken out for those family farms and small businesses that qualified for it. In 1999, the correction of inflation on the $10,000 annual gift tax exclusion was accomplished. By the year 2006, the $600,000 estate tax exemption had risen to $1 million.

The economy continued to grow, and in February 2000 it broke the record for the longest uninterrupted economic expansion in U.S. history.[9][10] However, it has been argued that the strong economic growth of the late 1990s was caused by wrong allocations and malinvestments of the NASDAQ Bubble and Dot-Com Bubble, both of which came to an end in late 2001 through mid-2002.[11]

After Republicans won control of Congress in 1994, Clinton vehemently fought their proposed tax cuts, believing that they favored the wealthy and would weaken economic growth. In August 1997, however, Clinton and Congressional Republicans were finally able to reach a compromise on a bill that reduced capital gain and estate taxes and gave taxpayers a credit of $500 per child and tax credits for college tuition and expenses. The bill also called for a new individual retirement account (IRA) called the Roth IRA to allow people to invest taxed income for retirement without having to pay taxes upon withdrawal. Additionally, the law raised the national minimum for cigarette taxes. The next year, Congress approved Clinton's proposal to make college more affordable by expanding federal student financial aid through Pell Grants, and lowering interest rates on student loans.

Clinton also battled Congress nearly every session on the federal budget, in an attempt to secure spending on education, government entitlements, the environment, and AmeriCorps–the national service program that was passed by the Democratic Congress in the early days of the Clinton administration. The two sides, however, could not find a compromise and the budget battle came to a stalemate in 1995 over proposed cuts in Medicare, Medicaid, education, and the environment. After Clinton vetoed numerous Republican spending bills, Republicans in Congress twice refused to pass temporary spending authorizations, forcing the federal government to partially shut down because agencies had no budget on which to operate.[12] In April 1996, Clinton and Congress finally agreed on a budget that provided money for government agencies until the end of the fiscal year in October. The budget included some of the spending cuts that the Republicans supported (decreasing the cost of cultural, labor, and housing programs) but also preserved many programs that Clinton wanted, including educational and environmental ones.