Taxing power

April 16, 2003

This much at least can be said about President Bush: He is extremely confident of the correctness of his course, and doesn't easily give up the quest to have his views prevail.

The latest case in point is Mr. Bush's dogged pursuit of a tax cut totaling "at least $550 billion over 10 years," despite the Senate's refusal last week to approve a reduction greater than $350 billion.

He urged lawmakers at a sun-washed Rose Garden appearance yesterday not to cling to an "arbitrary number" on the size of the package, but to determine "what our economy needs" and act accordingly.

Mr. Bush's admonition notwithstanding, the Senate already has forced the White House to scale back its even more ambitious scheme to lop off $726 billion in federal revenue over the next decade and is certain to prompt further concessions.

The president should take note that this restraint is being imposed on him by friends, and be grateful for their effort. Mr. Bush's focus on boosting reviews for his handling of the economy in time for his 2004 re-election bid may prove dangerously short-sighted - for him and the nation.

Congress' tortured effort to put together a budget blueprint for next year required senators to take a stand on the pivotal feature of tax cuts at a time when many are increasingly queasy about driving the country further into debt.

To reach agreement, GOP leaders resorted to gimmicks and side deals, resting in large part on the private, unwritten commitment of one influential committee chairman that he won't support a tax cut as large as the plan would technically allow.

What this likely means is that President Bush won't get what was once the centerpiece of his "jobs and growth" package: elimination of taxes on dividends, which analysts say would benefit mostly the wealthy and do little to spark the economy.

The Senate Finance Committee chairman, Charles Grassley of Iowa, who promised GOP moderates he would limit the tax cut package to $350 billion, favors elements of the Bush package more geared to the middle class. He would put into immediate effect many of the tax cuts approved in 2001, including marginal rate cuts and relief for married couples and families with children. Another likely feature in his package would be an increase in the deduction small businesses can take for equipment expenses.

Such a package would not only win approval from GOP moderates but might attract Democratic votes as well.

So, Mr. Bush should call off the henchmen he is sending out to rough up Republican dissenters, such as Olympia J. Snowe of Maine and George V. Voinovich of Ohio. They've probably done him a favor.

Even on April 15, when Americans are thought to be typically tax averse, polls showed they were wary of tax cuts at a time when the government is already borrowing heavily and faces huge security costs.

Like his father before him, Mr. Bush could win the war with Iraq and lose the economy if investors are spooked by uncertainty.

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