Bush's tax cut garners support

Republican Gramm, Democrat Miller back $1.3 trillion plan

January 23, 2001|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON — WASHINGTON-A bipartisan pair of senators launched the debate on President Bush's proposed tax cut yesterday, hoping to create momentum for the $1.3 trillion proposal by demonstrating early support for a broad package that would include an income tax rate cut.

Texas Republican Phil Gramm and Georgia Democrat Zell Miller joined to introduce the legislation based on Bush's campaign proposals weeks ahead of the president's timetable.

They said they wanted to get the debate on the tax cut started before Congress puts together the budget blueprint that will determine how much money is set aside for tax cuts.

"We are joining together in a crusade to see this tax cut, in its totality, adopted," said Gramm, the chairman of the Senate Banking Committee. "We want to see working Americans have an opportunity to benefit from the huge surpluses that we have today."

Gramm is not an unexpected ally for Bush, but he is an important one. A former Democrat, he was a key figure in the 1981 tax cut debate, crossing party lines as a member of the House to support the Reagan proposal despite the fierce opposition of his party leaders. A former economics professor at Texas A&M University, Gramm was also a leader in the deficit-cutting crusade of the 1980s that resulted in the Gramm-Rudman-Hollings legislation.

Miller, appointed to his seat last year, said he became the first Democrat to endorse the Bush tax cut after watching Congress dip so deeply into the budget surplus last year that he feared there would be nothing left to give back to the taxpayers.

"Right now, our taxes have never been higher. Right now, our surplus has never been greater. To me, it's just common sense you deal with the first by using the second," Miller said. "Remember that old Elvis Presley song `Return to Sender'? That's what we want to do right now."

The Gramm-Miller bill mirrors the proposal Bush outlined during the campaign. In includes reduction of the so-called marriage penalty, elimination of the estate tax, other targeted reductions and the rate cut. The measure faces substantial opposition in the almost evenly split Congress.

Too large?

Democratic leaders say that the proposal is too large and expensive. Senate Democratic Leader Tom Daschle said in a floor speech yesterday that "any tax cut must be affordable and fiscally responsible," and aimed primarily at the middle class.

Daschle did not specify a limit on the size of the cut, but other congressional Democrats have suggested a package of $600 billion to $700 billion over 10 years.

Even so, Daschle sounded optimistic.

"Our ability to achieve a strong bipartisan compromise on taxes will be the biggest test of our 50-50 Senate," Daschle told his colleagues. "I'm confident we can pass that test."

Some Republicans said the package should be broken into smaller components, such as elimination of the estate tax and the reduction of the marriage penalty, to facilitate passage. But Gramm said the package might get larger as it winds its way through Congress in the months ahead.

The price tag of the $1.3 trillion measure might grow if Congress makes the measure retroactive to the first of this year, as some GOP leaders have suggested, to spur the slowing economy. Some have placed the cost of such a proposal at $1.6 trillion.

Shifting brackets

As introduced yesterday, the Gramm-Miller tax package has six major components. By far the most expensive is a phased-in reduction of marginal income taxes rates at an estimated cost of $727 billion over 10 years. The five current tax rate brackets, which range from 15 percent to 39.6 percent, would be replaced with four rate brackets: 10 percent, 15 percent, 25 percent and 33 percent.

Charles E. Grassley, the Iowa Republican taking over as chairman of the Senate Finance Committee, has questioned whether such a large cut "would fly." But Gramm repeated Bush's concern that without a rate cut there is no guarantee in the legislation that every taxpayer would get some relief.

"Lower-income Americans get a larger percentage reduction in rates," Gramm said. "Higher-income Americans get a smaller percentage reduction. But obviously, the more taxes you pay, other things being the same, the larger the tax cut you will get. This is a tax cut for taxpayers."

If that feature of the bill is enacted, it will be the first cut in marginal rates since the 1981 legislation offered by former President Ronald Reagan. A second Reagan tax bill in 1986 streamlined the rate structure, cutting some taxes and raising others.

The other components of the bill have been approved in various forms by Congress in recent years but were vetoed by former President Bill Clinton. They include:

Doubling of the child tax credit to $1,000 per child from $500 and easing the "marriage penalty" on two-earner couples by excluding 10 percent of the lower salary, up to $30,000, at a cost of $250 billion over 10 years.

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