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The Omnibus Budget Reconciliation Act of 1993 (or OBRA-93) was a federal law that was enacted by the
103rd United States Congress The 103rd United States Congress was a meeting of the legislative branch of the United States federal government, composed of the United States Senate and the United States House of Representatives. It met in Washington, D.C. from January 3, 19 ...
and signed into law by President
Bill Clinton William Jefferson Clinton (né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 and again ...
on August 10, 1993. It has also been unofficially referred to as the Deficit Reduction Act of 1993. Part XIII of the law is also called the Revenue Reconciliation Act of 1993. The bill stemmed from a budget proposal made by Clinton in February 1993; he sought a mix of tax increases and spending reductions that would cut the deficit in half by 1997. Though every congressional Republican voted against the bill, it passed by narrow margins in both the
House of Representatives House of Representatives is the name of legislative bodies in many countries and sub-national entitles. In many countries, the House of Representatives is the lower house of a bicameral legislature, with the corresponding upper house often c ...
and the
Senate A senate is a deliberative assembly, often the upper house or chamber of a bicameral legislature. The name comes from the ancient Roman Senate (Latin: ''Senatus''), so-called as an assembly of the senior (Latin: ''senex'' meaning "the el ...
. The act increased the top federal income tax rate from 31% to 39.6%, increased the corporate income tax rate, raised fuel taxes, and raised various other taxes. The bill also included $255 billion in spending cuts over a five-year period. The effects of the bill helped the US federal government to experience in 1998 its first budget surplus since the 1960s era.


Provisions

* Previously, the top individual tax rate of 31% applied to all income over $51,900. The Act created a new bracket of 36% for income above $115,000 and 39.6% for income above $250,000. * Previously, corporate income above $335,000 was taxed at 34%. The Act created new brackets of 35% for income from $10 million to $15 million, 38% for income from $15 million to $18.33 million, and 35% for income above $18.33 million. * The 2.9% Medicare tax had previously been capped to apply to the first $135,000 of income. The cap was removed. * Transportation fuels taxes were raised by 4.3 cents per gallon. * The portion of
Social Security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...
benefits subject to income taxes was raised from 50% to 85%. * The phaseout of the personal exemption and the limit on
itemized deduction Under United States tax law, itemized deductions are eligible expenses that individual taxpayers can claim on federal income tax returns and which decrease their taxable income, and is claimable in place of a standard deduction, if available. Mos ...
s were permanently extended. * The AMT tax rate was increased from 24% to tiered rates of 26% and 28%. * Part IV Section 14131: Expansion of the Earned Income Tax Credit and added inflation adjustments. * $255 billion in spending cuts over a five-year period; much of the cuts affected Medicare or the military.


Legislative history

Clinton inherited major budget deficits left over from the
Reagan Ronald Wilson Reagan ( ; February 6, 1911June 5, 2004) was an American politician, actor, and union leader who served as the 40th president of the United States from 1981 to 1989. He also served as the 33rd governor of California from 1967 ...
and Bush administrations; fiscal year 1992 had seen a $290 billion deficit. In order to cut the deficit, Bentsen, Panetta, and Rubin urged Clinton to pursue both tax increases and spending cuts. They argued that by taming the deficit, Clinton would encourage Federal Reserve Chairman
Alan Greenspan Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. ...
to lower interest rates, which, along with increased confidence among investors, would lead to an economic boom. Some of Clinton's advisers also believed that a focus on cutting the deficit would be politically beneficial since it would potentially help Democrats shed their supposed "tax and spend" reputation. Though Secretary of Labor
Robert Reich Robert Bernard Reich (; born June 24, 1946) is an American professor, author, lawyer, and political commentator. He worked in the administrations of Presidents Gerald Ford and Jimmy Carter, and served as Secretary of Labor from 1993 to 1997 in ...
argued that stagnant earnings represented a bigger economic issue than the deficits, Clinton decided to pursue deficit reduction as the major economic priority of his first year in office. In doing so, he reluctantly abandoned a middle class tax cut that he had championed during the campaign. Clinton presented his budget plan to Congress in February 1993, proposing a mix of tax increases and spending reductions that would cut the deficit in half by 1997. Republican leaders strongly opposed any tax increase and pressured congressional Republicans to unite in opposition to Clinton's budget, and not a single Republican would vote in favor of Clinton's proposed bill. Senate Democrats eliminated the implementation of a new energy tax in favor of an increase in the
gasoline tax A fuel tax (also known as a petrol, gasoline or gas tax, or as a fuel duty) is an excise tax imposed on the sale of fuel. In most countries the fuel tax is imposed on fuels which are intended for transportation. Fuels used to power agricultural ...
, but Clinton successfully resisted efforts to defeat his proposed expansion of the earned income tax credit. Ultimately every Republican in Congress voted against the bill, as did a number of Democrats.
Vice President A vice president, also director in British English, is an officer in government or business who is below the president (chief executive officer) in rank. It can also refer to executive vice presidents, signifying that the vice president is on ...
Al Gore Albert Arnold Gore Jr. (born March 31, 1948) is an American politician, businessman, and environmentalist who served as the 45th vice president of the United States from 1993 to 2001 under President Bill Clinton. Gore was the Democratic ...
broke a tie in the
Senate A senate is a deliberative assembly, often the upper house or chamber of a bicameral legislature. The name comes from the ancient Roman Senate (Latin: ''Senatus''), so-called as an assembly of the senior (Latin: ''senex'' meaning "the el ...
on both the Senate bill and the
conference report In the United States Congress, a conference report refers to the final version of a bill that is negotiated between the House of Representatives and the Senate via conference committee. It is printed and submitted to each chamber for its considerat ...
. The House bill passed 219-213 on Thursday, May 27, 199

The House passed the conference report on Thursday, August 5, 1993, by a vote of 218 to 216 (217 Democrats and 1 independent (
Bernie Sanders Bernard Sanders (born September8, 1941) is an American politician who has served as the junior United States senator from Vermont since 2007. He was the U.S. representative for the state's at-large congressional district from 1991 to 20 ...
(I-VT)) voting in favor; 41 Democrats and 175 Republicans voting against

The Senate passed the conference report on the last day before their month's vacation, on Friday, August 6, 1993, by a vote of 51 to 50 (50 Democrats plus Vice President Gore voting in favor, 6 Democrats (
Frank Lautenberg Frank Raleigh Lautenberg (; January 23, 1924 June 3, 2013) was an American businessman and Democratic Party politician who served as United States Senator from New Jersey from 1982 to 2001, and again from 2003 until his death in 2013. He was ori ...
(D-NJ),
Richard Bryan Richard Hudson Bryan (born July 16, 1937) is an American attorney and politician who served as a United States Senator from Nevada from 1989 to 2001. A Democrat, Bryan served as the 25th Governor of Nevada from 1983 to 1989, and before that ...
(D-NV),
Sam Nunn Samuel Augustus Nunn Jr. (born September 8, 1938) is an American politician who served as a United States Senator from Georgia (1972–1997) as a member of the Democratic Party. After leaving Congress, Nunn co-founded the Nuclear Threat Initia ...
(D-GA),
Bennett Johnston Jr. John Bennett Johnston Jr. (born June 10, 1932) is a retired American attorney, politician, and later lobbyist. A member of the Democratic Party, Johnston represented Louisiana in the U.S. Senate from 1972 to 1997. Beginning his political care ...
(D-LA),
David L. Boren David Lyle Boren (born April 21, 1941) is a retired American lawyer and politician from the state of Oklahoma. A member of the Democratic Party, he served as 21st governor of Oklahoma from 1975 to 1979 and three terms in the United States Senate ...
(D-OK), and
Richard Shelby Richard Craig Shelby (born May 6, 1934) is an American lawyer and politician serving as the senior United States senator from Alabama. First elected to the U.S. Senate in 1986 as a Democrat who later switched to the Republican Party in 1994, h ...
(D-AL) now (R-AL)) and 44 Republicans voting against). President Clinton signed the bill on August 10, 1993. The government was able to raise additional revenue, which helped to balance the budget and, by the end of the 1990s, began to reduce privately-held public debt.


Alternatives

Some alternatives to the bill included a proposal by Senator David Boren (D-OK), which would have kept much of the tax increase on upper-income payers but eliminated all energy tax increases and scaled back the Earned Income Tax Credit. It was endorsed by Bill Cohen (R-ME), Bennett Johnston (D-LA), and
John Danforth John Claggett Danforth (born September 5, 1936) is an American politician, attorney and diplomat who began his career in 1968 as the Attorney General of Missouri and served three terms as United States Senator from Missouri. In 2004, he served br ...
(R-MO). Boren's proposal never passed committee. Clinton himself claimed he had an alternative tax proposal that favored taxes on energy. In 1995, he expressed belief that taxes had been raised too much (in 1997, Congress cut the capital gains tax from 28% to 20%). Another proposal was offered in the
House of Representatives House of Representatives is the name of legislative bodies in many countries and sub-national entitles. In many countries, the House of Representatives is the lower house of a bicameral legislature, with the corresponding upper house often c ...
by
John Kasich John Richard Kasich Jr. ( ; born May 13, 1952) is an American politician, author, and television news host who served in the U.S. House of Representatives from 1983 to 2001 and as the 69th governor of Ohio from 2011 to 2019. A Republican, Kasic ...
(R-OH). He sponsored an amendment that would have reduced the deficit by cutting $355 billion in spending with $129 billion of the cuts coming from entitlement programs (the actual bill cut entitlement spending by only $42 billion). The amendment would have eliminated any tax increases. The amendment failed by a 138-295 vote, with many Republicans voting against the amendment and only six Democrats voting in favor.


Aftermath

Combined with a strong economy, the 1993 deficit reduction plan produced smaller budget deficits each year. In 1998, the federal government experienced the first budget surplus since 1969. Reflecting the perceived importance of the budget surplus, the ''New York Times'' described the end of budget deficits as "the fiscal equivalent of the fall of the
Berlin Wall The Berlin Wall (german: Berliner Mauer, ) was a guarded concrete barrier that encircled West Berlin from 1961 to 1989, separating it from East Berlin and East Germany (GDR). Construction of the Berlin Wall was commenced by the gover ...
." The White House's Office of Management and Budget (OMB) projected that the bill would reduce the federal budget deficit by $504.8 billion, of which $250.1 billion came from tax increases and $254.7 billion came from spending cuts. Meanwhile, the Congressional Budget Office's (CBO) analysis projected lower deficit reduction, at just $433 billion. Differences in the two estimates stem primarily from the OMB's inclusion of savings that were indirect estimates from the budget, such as a 5-year $107.7 billion freezing of discretionary appropriations, $59.6 billion from lower interest on the debt in the future from reduced debt issuances, and $16.4 billion from the Treasury refinancing the national debt at lower interest rates. The CBO estimate did not count or only gave partial credit for the debt refinancing plan, spending cuts that were already included in the previous 1990 budget act but were furthered by the 1993 act, and a plan to auction off parts of the radio frequency spectrum to commercial communications vendors. https://library.cqpress.com/cqalmanac/document.php?id=cqal93-1105159


References


Works cited

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External links


Full text of the Act

Senate roll call vote

House roll call vote





A Summary Report
{{Authority control 1993 in American law United States federal taxation legislation
1993 File:1993 Events Collage.png, From left, clockwise: The Oslo I Accord is signed in an attempt to resolve the Israeli–Palestinian conflict; The Russian White House is shelled during the 1993 Russian constitutional crisis; Czechoslovakia is peacefu ...
1993 in economics