Bush tax package under pressure

Any short-term relief must be linked to 10-year plan, he says

March 28, 2001|By David L. Greene | David L. Greene,SUN NATIONAL STAFF

WASHINGTON - Hoping to reclaim some momentum for his sweeping tax-cut package, President Bush insisted yesterday that any short-term tax relief to come out of Congress be linked to his own 10-year, $1.6 trillion plan.

"Immediate tax relief is good news," Bush said in a speech in Kalamazoo, Mich. "But tax relief that gets yanked away next year is not such good news. Lower rates do not stimulate much economic activity unless people can rely on them for years down the road."

In what aides heralded as a major speech on the state of the economy, Bush continued to offer a generally gloomy portrait, pointing to slowed growth and a steady decline in the stock markets. This time, though, he also sketched a rosy long-term outlook, likening the economy to a long-distance runner - "somewhat winded, but fundamentally strong."

The president and his advisers have been forced to intensify and fine-tune their selling of the tax plan. Opinion surveys indicate public concern that Bush might have contributed to anxieties about the economy and the financial markets by expressing his own alarm in recent months.

"It's the president's job to look for warnings of economic trouble ahead and to heed them," Bush said in response yesterday. But sounding somewhat more upbeat about the future, he also said: "This is an economy that has done amazing things. And it's on the verge of even greater accomplishments and achievements."

Adding to the pressure on the White House's tax plan, congressional Democrats have moved to try to outflank Bush and capitalize on the public's worries about the economy. Senate Democrats unveiled their plan yesterday for a one-time $60 billion rebate that would give all taxpayers a $300 refund this year. The plan is intended to revitalize the economy as quickly as possible.

Taking to salesmanship in recent days, the White House has stressed that it is open to some tax relief immediately. But Bush has argued that any such measure should be part of his overall $1.6 trillion package. Otherwise, White House officials fear, Congress could pass short-term tax relief this year and then simply ignore Bush's plan for across-the-board cuts in tax rates for later years.

Bush has worked hard to protect his tax-cut package - the centerpiece of his domestic agenda - which he calls crucial to America's long-term economic health. Democrats and some moderate Republicans consider it too expensive, while some conservatives are pushing for it to be larger.

In trying to keep the cost of the Bush plan intact while still providing immediate tax relief, the administration has floated the possibility of delaying the repeal of the estate tax - which represents nearly 20 percent of the cost of Bush's tax cut - by a year or two.

But this week, a study by the bipartisan congressional Joint Committee on Taxation raised new concern about the price of Bush's package. The study, requested by Rep. Charles B. Rangel of New York, the senior Democrat on the House Ways and Means Committee, found that a repeal of the estate tax would cost hundreds of billions of dollars more than previously estimated. Some Republicans disputed that conclusion.

Any delay in ending the estate tax could irritate conservatives, who have long complained that it punishes heirs who are forced to sell assets to pay what critics say amounts to double taxation.

"There will be a lot of people upset by this," said Bill Beach, senior economist at the conservative Heritage Foundation.

"If you're 80 years old and were hoping to hold out," he said, "this would hurt your expectations."

Beach did applaud the White House for changing its tone in the past several days and for beginning to promote the long-term benefits of its tax-cut plan. He said the administration's previous strategy of painting the 10-year tax cut as a way to provide immediate stimulation for a sagging economy left it vulnerable to opponents who could call for a one-time rebate to give consumers more spending cash, as Democrats did yesterday.

The White House dispatched Treasury Secretary Paul H. O'Neill yesterday to make the case that high tax rates impede economic growth by stifling business expansion and by punishing employees who want to work more hours and earn more money.

"The president's tax-relief package structurally reforms a tax code that is taking too much from working America and placing a drag on our economy," O'Neill said in a speech to the National Association of Business Economists.

With some senators in both parties calling for a tax-cut plan that includes "triggers" - meaning tax cuts would take effect only if budget surpluses materialized over the next decade as projected - Bush also signaled a willingness to consider such an option for the first time last week.

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