House OKs broad cut in tax rate

10-year reduction would amount to about $958 billion

Bush celebrates victory

Plan faces resistance of some Republicans as it goes to Senate

March 09, 2001|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON - President Bush scored his first major victory in Congress yesterday when Republicans overcame stiff Democratic resistance to win House approval of a broad cut in income tax rates, the centerpiece of Bush's $1.6 trillion tax cut plan.

Bush announced the 230-198 vote to a cheering crowd in Fargo, N.D., where he was making the latest of a series of trips around the country to promote his budget and tax cut proposals and to try to put pressure on wavering lawmakers in the evenly divided Senate.

"The American people have had a victory today, the American family had a victory today, the American entrepreneur had a victory today," the president said. "One House down, and now the Senate to go."

Just 10 Democrats joined 219 unanimous Republicans and one independent in supporting the measure, which would reduce income taxes by $958 billion over 10 years. The sharply divided vote, and the acrimonious debate that preceded it, defied Bush's vows to bring a new bipartisan spirit to Washington.

The four Republicans and four Democrats from Maryland split along party lines, though Rep. Constance A. Morella, a Montgomery County Republican, required considerable persuasion from Republican whips to overcome her doubts and back the tax cut.

Many of the conservative Democrats whom Bush had hoped to win to his side complained that the tax cut was being rushed through too quickly to gauge its effect on other government programs or on the national debt.

Warning of the huge deficits that resulted from the 1981 Reagan tax cuts, Rep. Charles W. Stenholm of Texas, a leader of the conservative Democrats who refer to themselves as the Blue Dogs, said: "It pains me to think we have learned nothing from our mistakes."

Yesterday's vote, which was delayed for hours by Democratic stalling tactics, sends the bill to the Senate, which is divided 50-50. There, it will wait months for the senators to fashion their own proposal, which will then become part of further negotiations over a House-Senate compromise.

"They won't be able to pass this bill [in the Senate] in its current form unless something dramatic changes, and I don't expect it will," predicted Tom Daschle of South Dakota, the Democratic leader in the Senate.

But Sen. Charles E. Grassley, the Iowa Republican who is chairman of the Senate Finance Committee, countered such gloomy prognostication by calling a news conference to declare his optimism that the Senate will act as quickly as its balky procedures allow.

"Before spring gives way to summer, I'm confident tax dollars will be flowing back to where they belong - with the taxpayers," Grassley said.

In the Senate, though, the Bush plan faces significant obstacles because at least two of the 50 Republican senators have raised doubts about the size of his total tax cut.

Several other Republican, as well as Democratic, centrists have said they are determined to attach some kind of "trigger mechanism" that would bar tax cuts or spending increases from taking effect in future years if the huge budget surpluses now projected fail to materialize.

The Bush administration has said it would resist that idea, which is also opposed by both Republican and Democratic leaders.

The first phase of the tax cut battle in the Senate is likely to take place this spring during the crafting of the budget blueprint that guides overall tax and spending decisions.

Little immediate relief

It is considered all but certain that some form of tax cut legislation will be enacted this year because most lawmakers have endorsed the concept. None of the proposals under consideration, however, would offer much immediate tax relief.

The plan adopted by the House yesterday, designed in part to help stimulate the economy by giving taxpayers more money to spend, would phase out the income tax rates of 15, 28, 31, 36 and 39.6 percent. By 2006, the rates would be 10, 15, 25 and 33 percent.

The plan would also establish an interim 12 percent bracket, retroactive to Jan. 1, that would apply to the first $12,000 of taxable income for couples and $6,000 for individuals. This would mean a tax cut this year of up to $360 for couples and $180 for individuals.

Many taxpayers would not benefit at all, either because they earn so much that they would be forced to pay the Alternative Minimum Tax or because they earn so little that they pay mostly Social Security and Medicare payroll taxes, which would not be cut under this measure.

Republicans contended that even a few dollars right away, with the prospect of more to come, would boost consumer and investor confidence.

"Tax relief will put money into the economy and, hopefully, put an end to the to the nation's recent string of layoffs," said House Speaker Dennis Hastert of Illinois. "The faster we take action, the better off Americans will be."

But Democrats countered that the Bush plan is too tilted toward the wealthiest taxpayers and so expensive that it could shortchange vital social programs, such as Social Security and Medicare.

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