It's Full Speed Ahead with Bush Tax Cut Plan

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The following article is provided courtesy of CCH, Inc.

Senate Finance Committee member Phil Gramm, R-Texas, and Sen. Zell Miller, D- Ga., jump-started action on President Bush's $1.3 trillion tax-cut plan on January 22 by introducing the Tax Cut With a Purpose Bill of 2001, which Gramm said encompasses tax-cut elements outlined by Bush during his campaign.

The bill is based on three principal components of the Bush tax plan: (1) a reduction in marginal income tax rates; (2) the doubling of the standard deduction, including repeal of the marriage penalty; and (3) repeal of the estate tax. The decision to move ahead with the measure was approved by the administration, according to Gramm, who added that Bush was "delighted" that the bill was starting out on a bipartisan basis.

Miller said that he believed the measure would garner great Democratic support in the Senate and that many critics "will be surprised by how many Democrats end up supporting this bill."

Gramm said he introduced the bill now because he "wanted to get it out front on principle" with the expectation that the bill would evolve over time, eventually growing in scope and cost as technical adjustments were added, including accelerating the timeframe and making many of the provisions retroactive. Gramm stressed that Bush planned to keep the bill intact, rather than break out certain provisions as separate bills, and that Republicans had no plans to reduce the size of the proposal. "We are beginning this effort on a bipartisan basis and we are not looking to compromise," he said.

On CBS's "Face the Nation," on January 21, White House Chief of Staff Andrew H. Card, Jr., said that he is "not surprised" that Gramm is introducing the tax-cut bill, considering he is an "ardent supporter of the tax plan that President Bush supports." Noting that Gramm has found a Democratic cosponsor for his proposal, Card said that the administration expects "a lot of Democrats to support our plan."

White House Response

White House Press Secretary Ari Fleischer on January 22 called the advancement of the tax-cut plan "a very positive development." When asked whether the timing detracted from the president's push to make education reform his top legislative priority, Fleischer said that there is "nothing incompatible" about the tax-cut bill and other legislation being announced at the same time that Bush is focusing on his education proposal.

Democrats' Proposal

However, in a floor statement, Senate Minority Leader Thomas A. Daschle, D- S.D., said that Democrats planned to introduce a more modest proposal with targeted tax cuts totaling $700 billion. "The debate over how we structure that tax cut is likely to be the most consequential debate we have all year," said Daschle. While Democrats are willing to negotiate, Daschle said that the bulk of tax relief must go to middle-class working families and must be affordable and fiscally responsible.

The Democrats' bill, the Working Family Tax Relief Bill of 2001 (Sen 9) would also repeal the marriage penalty and eliminate the estate tax on more than 99% of estates, expand the earned income tax credit (EITC) and child care tax credits and provide tax breaks for retirement savings, long-term care and college tuition costs.

Under Gramm's proposal, nearly half the cost of the bill would come from the creation of four tax brackets at 10%, 15%, 25% and 33%, costing $727 billion over 10 years. Gramm said that the tax cut was needed because of three changes that have occurred since Bush's election: (1) a weakening of the economy; (2) higher budget surplus estimates; and (3) increased spending of the surplus at an unprecedented rate.

According to estimates by the Senate Budget Committee, on-budget surpluses over the next 10 years would total $2.9 trillion. Gramm said that projected spending by Congress over that time period would exceed the Bush tax cut by $.5 trillion. Responding to critics who call the tax cut too large and fiscally irresponsible, Gramm said that Senate Budget Committee estimates indicate that the Bush tax cut would postpone complete payment of the federal debt by only two years. Gramm also fended off arguments that a looming economic slowdown would throw the government into a fiscal crisis if it passed such a large bill by saying that negative economic growth was factored into the surplus estimates.

Action on the bill would not occur until after Congress completed the budget process, allowing enough "headroom" to pay for the tax cuts, said Gramm. Following action on the budget, it would be up to the House to put together a bipartisan version of the bill, approve it and send it to the Senate for final passage, he said.

Senate Majority Leader Trent Lott, R-Miss., said on CNN on January 22 that he would first talk to the president to see how he wanted to handle the bill, adding that "we should see how we can move it as early as possible. That is our first priority," he said.

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