Mr. Bacon: Good afternoon. Secretary Perry and Secretary of Treasury, Rubin, will be making an announcement about the tax treatment of servicemen's pay in the Former Yugoslavia. After that, they'll take some questions. We'd like to answer the questions first on the topic at hand. We will not take questions on Cuba. As you know, the President is going to make an announcement later this afternoon and we'll let the President speak about Cuba. Secretary Perry.

Mr. Perry: First of all, I'd like to say what a delight it is to have Secretary Bob Rubin here at the Pentagon. You're most welcome. He and I are here today to discuss the Clinton Administration's legislative proposal to provide tax relief for U.S. service members involved in Operation JOINT ENDEAVOR which, as you know, is implementing the Dayton Peace Agreement in Bosnia.

In a moment, I will ask Secretary Rubin to give you the details. But first, I would like to say a word about how well the U.S. and the IFOR troops are performing in Bosnia. After three and a half years of war, they have brought Bosnians a real hope for peace. Because of the Dayton Accord and IFOR's presence, the conflict has stopped. Forces have withdrawn behind the zones of separation. Areas have been transferred between the warring parties. And the freedom of movement is being maintained. So far, so good. But we must not forget the continuing dangers our troops face. Accidents from a combination of mines, bad weather, bad roads, and the possible threats from terrorist or rogue elements.

One reason that the mission has gone as well as it has is because we were well prepared. The rigorous training. Troops are well armed and they have a well defined mission with the means and the rules of engagement to execute it. From the beginning, we have provided strong support for the troops and their families. Indeed, we have made this a command responsibility -- from the President to the Secretary of Defense, General Joulwan, General Nash, down to the battalion commanders and the sergeant majors.

Components of this have included imminent danger pay for those deployed in the Former Yugoslavia; family separation allowance; free mail; a robust system of acute health care in the field and at home bases; Armed Forces Radio and Television Service and Stars and Stripes to help keep the troops in touch; family readiness briefings and support groups back home; and counselors to pay special attention to the children of the deployed soldiers.

Today, we are proposing special tax provisions, and that is another important way to support our troops. The President has been personally supportive of this. I'm going to read you a statement that he has made on this proposal. He said: "Historically, these special tax rules which include extending the time to file returns and providing special treatment to the military pay of those serving under hostile conditions have been restricted to individuals deployed in combat zones. However, the men and women of today's military confront their own hardships and risks in non-combat missions like the one we have undertaken in Bosnia. I believe the law should be extended to cover them and I look forward to working with Congress to enact these changes as quickly as possible."

Now, I'd like to introduce Secretary Rubin to provide the details of the Administration's proposal. Bob.

Mr. Rubin: Thank you very much, Bill, and thank you for the opportunity to be here to speak about the subject that will, I think, be of great importance to Americans who are performing a very important function for our country.

As Secretary Perry said, the President, Secretary Perry and I are asking Congress to pass as rapidly as possible legislation that would permit the President to direct that those who are serving in Operation JOINT ENDEAVOR be eligible for a variety of tax relief measures including tax free pay, and filing and tax payment delays.

The tax relief measures that we are talking about would cover all the personnel in and around the former Republic of Yugoslavia who are directly involved in or supporting JOINT ENDEAVOR. We are making this request for the reason that the President stated in his comment that Secretary Perry just read to you. Because short of fighting wars, preserving peace is a vital function of the American military and because in these circumstances duties are arduous and dangerous.

The request is in keeping with practices for members of the Armed Services that have been in effect dating back to the Korean War and implemented through presidential executive order. Let me now go through the details or some of the details of the tax relief all of which are retroactive to November 21st of last year.

For everyone stationed in Bosnia and Croatia, these measures would exempt from federal income tax all the pay of enlisted personnel and warrant officers and up to $500 a month for commissioned officers for the period that they are involved in Joint Endeavor. That also applies for two additional years for people who are injured and are in a hospital. Further, those in this area would benefit from the extension for the filing and payment deadline.

Our proposal would also extend the filing and payment deadline for everyone in the region around Bosnia and Croatia who are supporting Operation JOINT ENDEAVOR. In the event of a fatality in the course of JOINT ENDEAVOR, all that individuals income for the tax years in which they served in JOINT ENDEAVOR would be exempt from taxes. If state tax applies, there would be partial relief.

There are other components of tax relief, such as the exemption from withholding for tax free pay that are spelled out in materials that we have available for you today. The President, Secretary Perry and I feel the men and women who are sustaining peace in Bosnia deserve the tax relief we are proposing and we're asking Congress to act as quickly as possible to implement this request. Thank you. Secretary Perry or I would be delighted to respond to questions.

Q: Secretary, could I ask what this would mean for the average enlisted person in terms of tax? And overall, what this would mean for the Treasury and loss of tax revenue?

Rubin: The overall cost is estimated to be about $40 million dollars and, in terms of the average individual, Mr. Guttentag would be delighted to respond.

Mr. Guttentag: Yes. The relief afforded any particular service man would, of course, depend on all of his income. So, the people who are taxed on all of their income would depend on their grade, their pay. But the effect would be for those for who this is their only income, the service men would be completed exempt from federal income tax.

Q: Secretary Rubin, could you explain the difference between his proposal and the one that's already on the Hill. I understand it's going to be marked up tomorrow --

Rubin: I haven't seen the -- Chairman Archer's proposal. That's what you're referring to? Joe, have you seen Chairman Archer's proposal? No.

Strehlow: For the most part, the bills have been already introduced are very similar to this. They contemplate the same kind of relief. This is tailored a certain way to make sure the support personnel that are overseas and are away from home have the additional time to file their tax return and pay their taxes.

Q: That's the major difference?

A: That's the major difference. And what has been introduced so far, we don't know exactly what the Ways and Means Committee is planning to do on Wednesday, I believe. But, they are planning to make [inaudible].

Q: What's the additional time they have to respond?

A: They have until October. Is that right? October 15th.

Strehlow: Actually, it's under -- under what the IRS has done so far, they have until December. But this legislation would allow them up to 180 days after they'd get back or if they're hospitalized, 180 days after they're released from the hospital, to file and pay their taxes.

Rubin: So how long would somebody have let's say that they're there for the whole period?

Strehlow: They come back next December, they would have another six months or approximately till June of `97.

Q: Why doesn't this apply to people in Italy and in Germany? What portion of this applies to people supporting the troops in Bosnia?

Perry: This applies to the troops who are based in the former Yugoslavia. So, it affects the troops in three countries, Croatia, Bosnia and Macedonia.

Q: Why not the troops in Hungary and Italy? I understand they would get an extension. The filing extension, but why not a tax break for them?

Perry: A argument could have been made and was made for that. The distinction we made here had to do not only with the inconvenience of getting the returns in, but also with the extra danger, the extra hazards of the troops that were involved in the former Yugoslavia.

Q: But the people in Hungary would get the extension of the filing deadline.

Rubin: Absolutely.

Q: Mr. Rubin, you noticed that it was done in the past starting in Korea through presidential executive board is why can't the President do that now?

Rubin: Because those all had -- those were all in combat zones and this, as you know, is not a combat zone.

Q: Is there existing statute that allows the President could do that in combat?

Rubin: There is as I understand and that can be done through executive order. But this needs to be extended to a non-combat zone and that's the distinction.

Q: What about the folks onboard ship in the Adriatic?

A: Joe?

Strehlow: Yes. The support troops where they're located on land at Hungary or Italy or in the Adriatic on the ships will be covered by the relief giving them the additional time to pay their taxes and the other relief except for the exemption tax.

Q: Was something like this done during the Haiti Operation?

Rubin: No.

Q: Can we just ask one question. You've said you are very reluctant to say anything on Cuba before the President speaks. Could you at least tell us whether or not military air surveillance and military fighter jet flights have increased in the area since this incident -- aside from what the United States might or might not do.

Perry: We have, first of all, participated with the Coast Guard in the search and rescue Operation. That was initially air and sea. The air part of that has been suspended. The sea part of it still as of this moment continues and that includes two different Navy ships, the USS JOHN HALL which is a guided missile frigate and the USS MISSISSIPPI which is a guided missile cruiser, and they are supporting the Coast Guard ships which include the VIGILANT, the MANITOU, the NANTUCKET, and the PAPAW. As you know, no survivors have been found and the commandant of the Coast Guard will make the decision as to when to conclude this search.

Q: Have increased military air surveillance or a fighter jet sorties in the area?

Perry: We have from the beginning placed F-16s in southern Florida on alert and they continue to be on alert.

Q: And with sorties, have there been increased air sorties?

Perry: We have not been increasing air sorties. The air Operations have only been in support of the search and rescue Operation. We are on alert. We have an alert status in southern Florida, but that's just a simple routine precaution.

Q: Have you seen any increase in the hostile tone or tenor of the Cuban military aside from what may or may not be done by our government other than the one or the two incidents? Have you see any other indications of hostile intent?

Perry: No.

Q: Mr. Secretary, are there any circumstances that would justify shooting down unarmed civilian planes who are violating somebody's air space?

Perry: This is going to be my last comment on the subject. The action that the Cubans took was outrageous. There were no justification for it. It was not only that these airplanes flew in international air space and it was not only that they were civilian and unarmed aircraft, but the pilot who shot them down knew they were unarmed and knew they were civilian. There is no excuse for that action. Thank you.

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