Treasury secretary stresses income tax cuts as economic stimulus

The Associated Press
Thursday March 15, 2001

WASHINGTON — Meeting with a group of pivotal Senate moderates Wednesday, Treasury Secretary Paul O’Neill stressed the importance that President Bush is giving across-the-board income tax cuts as a tonic for the flagging economy. 

After meeting with seven Republican and six Democratic members of the Centrist Coalition, O’Neill told reporters the group talked about “everything you can imagine” involving how to get President Bush’s tax cut through the Senate, divided evenly between the GOP and Democrats. 

“It’s great to have this kind of opportunity to talk to people of good will who are working hard to figure out how we can do something that represents the best interests of the American people,” O’Neill said. 

Participants said O’Neill was particularly insistent that the Senate follow the House lead in passing as quickly as possible the 10-year, $958 billion cut in marginal income tax rates, indirectly suggesting that other parts of Bush’s $1.6 trillion plan were of lesser urgency as an economic stimulus. 

Sen. Olympia Snowe, R-Maine, framed the administration message this way: “Given the fact that we are in a dropping economy ... this may give a measure of confidence that we are moving expeditiously with one significant aspect of the package.” 

Many of the moderates support a “trigger” concept that would permit tax cuts to go forward in a given year only if projected surplus revenues actually materialize.  

O’Neill signaled a willingness to consider the idea, which the Bush administration had rejected out of hand previously. 

Sen. Arlen Specter, R-Pa., said the meeting produced no “magic bullet” to bring aboard a group that has many problems about the tax cuts, including its size and the relatively high level of relief that goes to upper-income people.  

Several participants said, however, that O’Neill recognized that moderates could hold the key to passing the plan. 

“If our centrist coalition could agree as a group, it would be weighed very seriously by the White House,” Specter said. 

Earlier Wednesday, conservative House Republicans rallied around a broad plan that would raise the ante on Bush’s tax cuts to $2.2 trillion over 10 years. 

The group, which includes Majority Leader Dick Armey and Majority Whip Tom DeLay, both from Texas, said passing the president’s plan remains their first priority.  

But they said ample room remains for greater tax relief within the projected $5.6 trillion surplus over the next 10 years. 

“Our first responsibility will be to move the president’s package,” Armey said. “Let’s start the debate about what we can do in addition to that.” 

The 65 conservative members of the Republican Study Committee have lined up behind a proposal by Rep. Pat Toomey, R-Pa., that would enact deeper across-the-board income tax cuts than under the Bush plan and phase them in more quickly. 

It also would eliminate the tax marriage penalty paid by millions of two-income couples, and give tax relief to other one-income couples who don’t pay a penalty, while Bush’s plan only partly eases the penalty by giving couples a limited deduction for one spouse’s income. 

The conservatives also want to cut capital-gains taxes on investments by 25 percent, phase out the estate tax more quickly than does Bush, increase contribution limits for Individual Retirement Accounts, repeal the century-old telephone excise tax and increase the business meal deduction.  

On the Net: Congress: http://thomas.loc.gov 

Republican Study Committee: http://www.house.gov/burton/RSC