Tax cut measure gains priority

Finance chairmen tell Bush climate for action improved

January 30, 2001|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON - President Bush and Republican leaders of the tax-writing committees on Capitol Hill began laying the groundwork yesterday for action on a broad federal tax cut that they hope can be enacted this spring.

At a White House meeting, the lawmakers told Bush that they believe the climate for action to reduce income tax rates, perhaps by mid-April, had greatly improved after Federal Reserve Chairman Alan Greenspan gave his blessing last week.

"Members of both parties are beginning to talk positively about tax relief and the positive effects it'll have on our economy, on the lives of our average citizens," Bush told reporters. He made the remark near the close of his meeting with California Rep. Bill Thomas, chairman of the House Ways and Means committee; and Iowa Sen. Charles E. Grassley, chairman of the Senate Finance Committee.

The meeting was called, in part, for the president to formally unveil a $48 billion proposal to help states provide prescription drug coverage for the elderly poor, fulfilling a campaign pledge. Bush says his proposal would be an interim step to protect needy seniors while Congress works to redesign Medicare to include a drug benefit for everyone in the program.

But Congress is unlikely to act on Bush's proposal. Instead, Thomas and Grassley said they planned to include a prescription drug benefit in a broader Medicare reform package they intend to offer later this year.

At the moment, a sweeping tax-reduction measure is a higher priority, they said.

Among the cuts that could be approved: across-the-board reductions in income tax rates; doubling the $500 child care credit; and easing the "marriage penalty" on two-income couples.

Those cuts would "put money in the hands of people as quickly as possible," said Thomas, echoing Bush's call to stimulate an economy that appears to have stopped expanding after a decade of record growth.

The reductions would likely be made retroactive to Jan. 1. Withholding rates would immediately be adjusted downward as well, allowing taxpayers to put more money in their pockets this year, instead of waiting until they file their returns to receive a refund.

Thomas, who recently took over as Ways and Means chairman, told reporters that he is sounding out his colleagues to see if there is enough bipartisan support to push the measure through an almost evenly divided Congress.

"Anybody who listened to or read Greenspan' s testimony has to be sobered by it," Thomas said to reporters. Greenspan told Congress last week that he suspected that economic growth had dropped to zero and that if the federal budget surplus continued to grow, it could complicate the Fed's efforts to manage the economy.

"If there's any stimulative effect to the tax cut, you probably wouldn't want to wait and lose that window," Thomas said.

Tax bills must originate in the House, but informal debate on the issue has already begun in the Senate. Last week, a proposal similar to the $1.6 trillion tax cut package Bush offered during his presidential campaign was introduced by Sens. Phil Gramm, a Texas Republican, and Zell Miller, a Georgia Democrat.

Both were among 16 members of Congress who attended a meeting later yesterday with Bush at the White House to discuss possible areas of bipartisan cooperation.

"We're going to try to build upon the opening that Greenspan gave us, which is changing the minds of a lot of Democrats about the size of a tax cut," Grassley said after his earlier session with Bush.

Some congressional Democrats have put a different spin on Greenspan's testimony. They believe that he wasn't so much arguing in favor of tax cuts but merely indicating that he no longer is strongly opposed.

In either case, his remarks have improved the prospects for quick action by Congress. That, some critics warn, could turn into an expensive bidding war on taxes in which lawmakers from both parties try to win breaks for their constituencies.

Over the weekend, House Minority Leader Richard A. Gephardt, who had already signaled a willingness to consider a larger tax cut, went even further. The Missouri Democrat suggested that the reductions might be as much as $750 billion over 10 years -more than double what the Democrats were proposing last year.

Gephardt also said he believed that "there is room for rate cuts." Previously, Democrats had opposed cutting income tax rates for the wealthiest Americans, preferring instead to target tax relief to specific groups, such as lower- and middle-class parents of college students.

Thomas said any tax cut would have to pass the House by a wide enough margin to make it politically difficult for Democrats to use parliamentary maneuvers to block a vote in the Senate.

"Moral suasion, the ability of the House to show a bipartisan willingness on a reasonable program, that's what's going to sway the Senate," Thomas said. "That's all we've got available."

But Democrats on his committee aren't yet falling in line.

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