Support grows for a quick cut in income tax

But Democrats balk at linking the plan to 10-year rate cuts

March 24, 2001|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON - A tentative consensus is developing on Capitol Hill in favor of enacting a speedy tax cut this year as a way to give Americans more money to help energize the sagging economy.

Republican and Democratic leaders remain more closely aligned in their rhetoric than on the details of their proposals. Yet both sides, clearly spooked by the sharp drop in the stock markets, are pushing for action that would put some extra money in the pockets of every taxpayer within six months.

"There are ways to get it done," President Bush said yesterday in applauding the emerging sentiment in favor of quick tax relief.

"The key thing," Bush said, "is that good people are coming together to try to effect good sound fiscal policy and to stimulate the economy."

Tom Daschle, the Senate Democratic leader, endorsed yesterday the proposal advanced this week by Senate Republicans to devote about $60 billion in surplus funds from the current fiscal year to a tax cut that could become available as soon as July.

Daschle suggested that Congress could act before Easter to drop the lowest income tax rate, from 15 percent to 10 percent, as well as to provide a tax rebate to "do as much as possible to get this money out into the economy as quickly as we can."

Reducing the lowest bracket would have the effect of withholding less money from Americans' paychecks. A rebate, on the other hand, might come in the form of checks to taxpayers.

But Daschle objected to Republican plans to include a $60 billion tax cut for this year as part of the nearly $1 trillion cut in tax rates, already proposed by Bush, that would be phased in over the next decade. Bush's plan would provide little benefit to taxpayers this year.

The Democratic leader said he favored first approving the immediate tax cut to help invigorate the economy before separately considering the 10-year Bush tax-cut plan, which most Democrats think is too large.

"There is no way you can take the comprehensive tax approach the Republicans are proposing and do anything speedy about it," Daschle said. "I think the $60 billion approach makes sense, so long as we not hold it hostage to all the other things that need to be done."

Long-term rate cut backed

Republicans, however, remain committed to advancing Bush's 10-year cut in tax rates, which would affect all income brackets, and say that the $60 billion tax cut would amount to accelerating it.

"The real benefit to the economy would come from the long-term rate cut," said Bob Stevenson, a spokesman for Sen. Pete V. Domenici, the New Mexico Republican who is chairman of the Budget Committee and who proposed the $60 billion tax cut for this year.

The short-term plan, Stevenson said, would provide only "momentary relief."

Republicans say they are also determined to push through other elements of Bush's tax-cut plan separately, including a reduction in the "marriage penalty" that affects many two-earner couples, a doubling of the child tax credit and elimination of the estate tax.

The House has already passed Bush's $958 billion proposed cut in income tax rates and plans to act next week on the marriage penalty and the child credit.

Republicans say they are resolutely opposed to allowing the $60 billion tax cut to be enacted on its own, separately from Bush's 10-year rate cut.

Failure predicted

A top aide to Don Nickles of Oklahoma, the Senate Republican whip, flatly predicted yesterday that a stand-alone $60 billion package would fail to win approval from the Republican voting majority in the Senate. Even so, the two sides seem to be edging closer to an agreement on a tax cut that would take effect within a few months.

"I think there will be one," said Kevin Hassett, a scholar at the American Enterprise Institute, a conservative research organization. "It's just not clear yet what's it going to look like."

Treasury Secretary Paul H. O'Neill said he had seen "a remarkable change in attitude" from just two months ago, in favor of speedy action on a tax cut.

Rep. Benjamin L. Cardin, a Baltimore Democrat who sits on the tax-writing Ways and Means Committee, said he could foresee a bargain's being struck for a short-term tax-cut package, along with some inducements for the business community, which is clamoring for business breaks.

Warning from Cardin

Though some Democrats have publicly called for an immediate tax cut to boost the economy, Cardin cautioned against confusing "politics" with "substance."

"I don't think there's anybody here who actually believes a tax cut would do that much for the economy in the short term," he said.

Still, Democrats have been more supportive of tax cuts this year than they have been in decades, Cardin said, because "we got burned in the election last year" when many voters seemed responsive to the calls for broad tax cuts from Bush and other Republicans.

Hassett made a similar observation: "The Democrats are afraid that if they oppose tax cuts and the economy goes under, they'll get blamed."

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