Politics

Tax Fight Moves To Senate

By CBSNews.com staff CBSNews.com staff

March 6, 2001 / 12:04 PM EST / CBS

President Bush's across-the-board income tax cut plan, after hurtling through the House, is about to come to a screeching halt in the Senate, where Democrats and Republicans say it will take time and compromise to produce a final agreement.

"The size and scope and fate of this bill will be determined in the Senate," said Sen. Max Baucus of Montana, senior Democrat on the tax-writing Senate Finance Committee.

The panel's chairman, Sen. Charles Grassley, R-Iowa, said it will be May before the committee starts working in earnest on its version of Mr. Bush's 10-year, $1.6 trillion tax cut package. By that time, the House likely will have passed several other items in Bush's plan to add to the $958 billion income tax cut that Republican leaders pushed through the chamber Thursday.

Even as the president basked in the 230-198 House vote in favor of the income tax cut, Mr. Bush recognized there was much work ahead. There are 50 Democrats and 50 Republicans in the Senate, giving Democrats much greater clout in determining the outcome.

"One House down, and now the Senate to go," he told an audience Thursday in Fargo, N.D., a state represented by two Democratic senators who oppose his plan.

Republicans were exultant at the quick House victory, which came only 48 days into Mr. Bush's term, and promised in the coming weeks to send the Senate other parts of the president's tax plan.

Candidates for the next measure in the pipeline include those addressing the "marriage penalty" paid by millions of two-income couples, doubling the $500 child tax credit, repealing the estate tax and expanding tax breaks for charitable contributions.

In often heated debate on the House floor Thursday, Democrats accused Republicans of ramming the legislation through Congress.

"This is a partisan process," House Democratic Leader Dick Gephardt of Missouri told reporters. "This is happening without a budget, without hearings, without input from anybody ... This is a continuation of a my-way-or-the-highway leadership. George Bush has not changed the climate in Washington."

But Republicans said Democrats were crying foul because they do not support tax cuts.

"Their problem is they are just having a hard time supporting real tax reduction," House Ways and Means Committee Chairman Bill Thomas, a California Republican, said during the House debate.

In a striking show of unity, all 219 Republicans who voted did so in support of Mr. Bush's plan. Ten Democrats crossed the aisle to vote with them. One independent also supported the measure.

In opposition were 197 Democrats and one independent.

A less expensive Democratic tax-cut alternative which would have cost $586 billion over 10 years was rejected on a vote of 273-155.

The legislation passed Thursday would gradually reduce and condense the current ive graduated income tax rates of 15 percent, 28 percent, 31 percent, 36 percent and 39.6 percent. By 2006, rates would be pegged at 10 percent, 15 percent, 25 percent and 33 percent.

To provide relief immediately, the measure also would create an interim 12 percent bracket, retroactive to Jan. 1, 2001, applied to the first $12,000 of taxable income for couples and $6,000 of taxable income for individuals.

Officials said that would mean a maximum tax cut this year of $360 for a couple and $180 for an individual.

The Bush Tax Plan

What's In It For Me? Find out how much you could save this year and once the tax plan has been fully implemented.

Things will be tougher for Mr. Bush in the Senate, which is evenly split between the two parties, and where some moderate Republicans aren't prepared to write the president a blank check on taxes.

On Wednesday, five GOP senators — among them, Olympia Snowe of Maine and Arlen Specter of Pennsylvania — joined with moderate Democratic lawmakers who say any tax cut plan must come with a fiscal "trigger." This bipartisan bloc wants the tax cut plan written in such a way that if projected federal budget surplus money dries up somewhere down the line with debt reduction and/or spending targets not met, then the phase in of the tax cut stops.

"We can't predict" the ultimate size of the surplus money, Snowe said. "And the longer we go out on those projections, the more difficult it becomes and the riskier it becomes. That's why we think that it would be prudent to move forward with a trigger concept that would make sure that we have the financial stability of the future."

Under the Bush plan, the across-the-board tax cuts are to be paid for by the surplus and phased in over the next ten years without a trigger. Less than a third of the cuts kick in during the next five years. Most of the cuts, more than a trillion dollars' worth, take effect between 2007 and 2011.

Administration officials vehemently oppose the trigger concept - and Democratic leaders on Capitol Hill haven't endorsed the idea, either. The White House believes the approach would encourage Congress to spend the surplus.

But the president may have to reconsider the fine print of his proposal, because it's become even cleare now that he simply doesn't have the votes in the Senate to pass his plan in its current form.

Even before House debate began, Senate Democratic Leader Tom Daschle said the legislation as now structured had no chance of passage there.

"They will not be able to pass the bill in its current form unless something dramatic occurs and I don't expect that it will," said Daschle.

Thursday's action was just the first step in persuading Congress on the rest of Mr. Bush's $1.6 trillion package, which calls for eliminating the estate tax and reducing the added tax on married couples known as the "marriage penalty."