Tax cut plan sent to Bush by Congress

President pledges late-summer mailing of refund checks

`More tax relief is on the way'

Democrats foresee shortage of money for education, defense

May 27, 2001|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON - As its last act under total Republican control, Congress enacted yesterday the first major tax cut in two decades and gave President Bush a speedy victory on the top priority of his administration.

With final votes in the House and Senate on a compromise version of the $1.35 trillion, 10-year package that nearly mirrors the original Bush proposal, the lawmakers sent the measure to the president, who is expected to quickly sign it into law.

Bush returned to the White House from Camp David to say that for only the second time in 40 years "an American president has the wonderful honor of letting the American people know that tax relief is on the way."

The package includes income tax rate cuts in nearly every bracket, a doubling of the $500-per-child tax cut, reduction of the so-called marriage penalty on two-earner couples, phase-out of the estate tax, and increased breaks for tuition and pension savings.

At the last-minute urging of the president, the first benefits from the tax cuts are scheduled to arrive in late summer in the form of refund checks mailed to all 95 million taxpayers. Individuals will receive up to $300, single parents will get up to $500 and checks to married couples will total up to $600. Bush hopes the quick infusion of cash will stimulate the sagging economy.

"The check will literally be in the mail," the president told a cheering audience in the East Room. "You can feel comfortable using it because more tax relief is on the way."

Much of the relief from other provisions of the bill will be delayed for five years or more. But most taxpayers should begin to see in July a drop in taxes withheld from their paychecks when rate reductions or other changes take effect for all income brackets.

Democrats warned that Congress was making a dangerous mistake by committing to major tax cuts that, they said, will limit the government's ability to pay for critical programs such as education and defense. They recalled the decades of deficits that followed the Reagan tax cut in 1981.

"Twenty years from now we're going to remember this as a defining moment," said House Democratic leader Richard A. Gephardt of Missouri. "This bill is an outrage against the common sense and decency of the American people. This vote will be remembered for your entire career and will be remembered by you for the rest of your life."

Sen. James M. Jeffords of Vermont, whose change from Republican to independent will throw control of the Senate to the Democrats when the lawmakers return June 5 from their Memorial Day recess, voted for the measure, which passed 58-33. He delayed the date of his party switch to allow the tax cut bill to go through without Democratic obstruction.

"This is a great day for the people who do the work and pay the taxes and pull the wagon in America," said Sen. Phil Gramm, a Texas Republican who had been among the earliest advocates of Bush's proposal. "And it's a sad day for those who desperately want to spend this money in Washington."

Twelve Senate Democrats supported the measure, while two Republicans, Sens. John McCain of Arizona and Lincoln D. Chafee of Rhode Island, joined the majority of Democrats against it.

Maryland's two senators, Democrats Paul S. Sarbanes and Barbara A. Mikulski, were among the dissenters who argued that the measure is too costly and relies too heavily on projected budget surpluses that may not materialize.

"For a few pennies of gain, we've put a second mortgage on America's future," Mikulski said.

She argued that the full cost of the measure will come due just as the baby boomers begin to retire and begin drawing on Social Security and Medicare funds that may no longer be available.

But two days of intense negotiations among a handful of lawmakers and the White House produced a compromise that sailed through both houses of Congress in a matter of hours.

"The party is no longer in Washington," declared House Majority Leader Dick Armey of Texas before the House voted 240-154 yesterday morning to approve the bill. "We're no longer going to get stoned on other people's money. We're going to move the party to America, where people can spend their own money.

All four of Maryland's Republican House members voted for the tax cut package. Three of Maryland's four Democrats voted against it. Rep. Albert R. Wynn, a Prince George's County Democrat, was among many lawmakers who missed yesterday's vote.

Opposing the measure was a painful decision for Rep. Benjamin L. Cardin, a Baltimore Democrat, because it included the provisions on increasing tax benefits for pension savings that he had been seeking for at least two years.

Those provisions will gradually raise the tax-deductible limits on contributions to IRA and 401(k) plans, provide catch-up provisions for workers nearing retirement age to make larger contributions and encourage employers to offer pension benefits.

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