Tax cut bill goes to Congress

The Associated Press
Friday February 09, 2001

WASHINGTON — President Bush dispatched his proposed $1.6 trillion, 10-year tax cut on what should be a tortuous journey through Congress on Thursday, urging action because “a warning light is flashing on the dashboard of our economy.” 

Democrats, while insisting that they, too, want to trim taxes this year, cast Bush’s proposal as a version of President Reagan’s first tax cut. They said the Bush plan was too big, risked plunging the federal budget back into deficit and was skewed toward the rich. 

“We’ve already tried what President Bush is proposing,” said Senate Minority Leader Tom Daschle, D-S.D. “We did that in 1981. The rich got richer. The poor got poorer. And working families got stuck with the entire bill.” 

While Democrats try halving the size of Bush’s package and aiming it more at lower-income Americans, many Republicans and lobbyists will spend the next few months seeking to add on. 

Some GOP lawmakers have talked of pushing the price tag beyond $2 trillion. Business groups want to insert provisions trimming corporate income tax and capital gains tax rates, speeding up writeoffs for equipment purchases, and other items. 

“We’re on the verge of a feeding frenzy all across the board,” said Sen. Max Baucus of Montana, senior Democrat on the tax-writing Senate Finance Committee. 

The opposing tugs from both sides mean it is impossible to predict what the final bill will look like. But there is virtually no doubt that Congress this year will pass the biggest tax cuts since Reagan’s 1981 package. 

What Treasury Secretary Paul O’Neill actually delivered to Congress was a nine-page document describing the plan Bush campaigned on, which focused on a reduction in income-tax rates. It would also double the $500 per child tax credit, phase out the estate tax, make permanent the temporary credit for business research and reduce the marriage penalty, which is the extra tax some couples must pay after they marry. 

GOP leaders were pleased to begin their first serious tax-cutting drive in years. Former President Clinton vetoed most of their tax cuts since they took over Congress in 1995. 

“After years of waiting, we finally have received an honest to goodness tax proposal from the White House,” said House Speaker Dennis Hastert of Illinois. 

Though the bill may not clear Congress until at least the summer, Bush spent the third week of his presidency pushing his tax plans in daily appearances. His hope is to take advantage of momentum provided by the sluggish economy and skyrocketing budget surplus estimates. 

“Our Treasury is full and our people are overcharged,” Bush said in the White House Rose Garden, where he also reiterated his desire to make some of the cuts retroactive to last Jan. 1.  


“Returning some of their money is right, and it is urgent,” he said, underscoring the argument that a tax cut should help the slowing economy. 

Bush said his plan would mean tax savings of $1,600 to the average family of four, though he didn’t mention that that would be years from now, when all of the tax cuts are fully phased in. 

Besides putting extra money into people’s pockets, Bush said the cuts made sense in light of projected budget surpluses. The Congressional Budget Office envisions $5.6 trillion in surpluses for the coming decade. 

Bush and his aides say his plan will help lower- and middle-income taxpayers most because their reductions would grow by the largest percentages. Bush said families earning between $35,000 and $75,000 would get tax breaks of from $600 to $3,000 more each year. 

But Democrats say the biggest winners would be the rich, who pay most of the taxes but would also see the largest dollar savings. According to the Democratic-leaning Institute on Taxation and Economic Policy, the bottom 60 percent of taxpayers, earning less than $39,300, would get an average $227 tax cut, while the richest 1 percent – making $319,000 or more – would get an average $46,072. 

That led Daschle and House Minority Leader Dick Gephardt, D-Mo., to meet with reporters Thursday next to a muffler and a new 2001 Lexus. They said those represented what lower-income and wealthy taxpayers could buy, respectively, with their tax savings. 

Democrats say they are working on an alternative they expect to cost $700 billion to $800 billion, which would help all taxpayers but be more targeted on lower- and middle-income earners. 

Gephardt said it may include tax cuts contingent on the government running specified surplus amounts, and aides said it may include rebates that would be mailed to taxpayers.