Senate OKs huge GOP tax-cut bill

$792 billion in breaks aimed at middle class

Clinton has promised veto

Showdown is likely after August recess

July 31, 1999|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON -- Setting the stage for a showdown over the budget surplus, the Senate approved a far-reaching $792 billion Republican tax cut yesterday that President Clinton has insisted he will veto.

The senators, lining up largely according to party, voted 57-43 to return to taxpayers most of a $1 trillion surplus that is expected to be available over the next decade.

"With the money that's left over, we want to cut taxes, and the president wants to spend it -- that's what this fighting is all about," Senate Majority Leader Trent Lott said. "We're determined to give working Americans the tax relief they're entitled to."

But Clinton and the Democrats say it is dangerous to cut taxes so deeply before it is clear that the projected surplus will materialize. The surplus estimates depend on a continued robust economy and on the presumption that Congress will make deep cuts in domestic spending.

The president argues that an enormous 10-year tax cut could wipe out the surplus and make it impossible to assure the solvency of Medicare and Social Security.

The White House and many Democrats in Congress favor Clinton's smaller proposed tax cut of up to $300 billion.

"The Republican tax cut is so large it would undo our fiscal discipline and imperil our prosperity," Clinton said in a statement yesterday.

Just four Democrats -- Sens. Bob Kerrey of Nebraska, Robert G. Torricelli of New Jersey and John B. Breaux and Mary L. Landrieu of Louisiana -- voted for the Republican bill. And just two Republicans -- Sens. Arlen Specter of Pennsylvania and George V. Voinovich of Ohio -- voted against it.

Negotiations are scheduled to begin over the weekend to reconcile the differences between the Senate's tax-cut bill and a separate version passed by the House, with the goal of forging a combined product before Congress begins its monthlong summer recess at the end of next week.

The House and Senate bill would cut taxes by an equal amount, but they take different approaches to get there.

The sharpest dispute to be resolved is over whether to adopt the House approach of a broad 10 percent income tax rate cut for all Americans regardless of income, or the Senate tack of focusing more relief on the working poor and middle class.

Republican leaders have no intention of sending the finished bill to Clinton until they return from their summer recess after Labor Day.

They want time to try to build enthusiasm for the measure among their constituents before Clinton can veto it and then portray the Republicans as favoring tax cuts for the wealthy over the protection of Medicare and Social Security for the middle class.

Different priorities

Public opinion polls suggest that Americans place a higher priority on paying down the federal debt and on saving Social Security and Medicare than they do on tax cuts.

Republicans contend that they can achieve all three objectives. But the president wants the tax bill reduced by at least half.

Clinton says the Republican proposals would either require unacceptably deep cuts in health, defense, education, environmental protection and other programs, or risk bringing back "the dark old days of huge deficits."

The Republicans counter that their plan would set aside most of the projected surplus for Social Security. They say they simply want to return the excess tax revenue to its rightful owners, the American taxpayers.

"The problem is, if you have a surplus on the table in this town, it gets spent," said House Speaker Dennis Hastert of Illinois. "The president already has plans to spend that money."

Yet Hastert predicted that when the process is concluded -- perhaps not until the end of this year -- a deal would be struck to permit a major tax cut.

"I think the president ultimately will come around on this issue," the speaker said. "We don't think it's risky to have faith in the American people."

The Senate version of the tax-cut bill is considered to be more appealing to middle-class Americans because it lacks some features in the House bill that favor affluent Americans.

For example, the Senate measure would cut personal income tax rates only for those in the lowest bracket, dropping that rate to 14 percent from 15 percent. The House bill, by contrast, would phase in a 10 percent across-the-board reduction on personal income tax rates for all Americans, even the wealthiest.

`Marriage penalty'

The Senate bill would also provide greater relief to married couples by reducing the "marriage penalty" that forces many married couples to pay more in taxes than if they were single.

On one amendment, the Senate voted 98-2 to increase the standard deduction allowed for married couples, beginning in 2001. The measure would also allow couples to file joint returns as if they were single, beginning in 2005.

Reflecting the priorities of Sen. William V. Roth Jr., the Delaware Republican who is chairman of the Finance Committee, the Senate bill also grants breaks for retirement savings, something the House bill does not.

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