- The Washington Times - Wednesday, January 10, 2001

House Majority Leader Dick Armey told Republicans yesterday that to avert a recession Congress should immediately pass a retroactive, across-the-board cut in the income-tax rate.
A recession may not be inevitable, "but because the economy is slowing down, I believe it is vital that Congress pass a pro-growth tax cut," the Texas Republican wrote in a memorandum to House Republicans. The memo also was posted on his World Wide Web site (www.armey.house.gov) and sent to reporters.
"The Fed has done its job, now it's time for us to do ours," Mr. Armey wrote, referring to the Federal Reserve Board's decision last week to lower interest rates.
Conservative groups have called Mr. Armey's office to express their support, said an aide there, but with Congress not in session there has not yet been a chance to gauge members' responses.
The push follows speculation that President-elect George W. Bush may try to accelerate Congress' consideration of his tax-cut plan.
"It is possible that we may need to implement it faster," Mr. Bush said of his tax-cut proposal at an economic forum in Austin last week.
Mr. Armey said Congress should pass Mr. Bush's entire tax-cut plan, but at the very least should "very quickly" pass a proposed reduction in personal income-tax rates and proposals to expand 401(k) plans and individual retirement accounts.
"Some are arguing that we should put off the income-tax rate cut until later in the year. I disagree," Mr. Armey said.
House Speaker J. Dennis Hastert, Illinois Republican, has suggested that Congress and Mr. Bush should try to gain several quick victories, focusing first on a repeal of the estate and gift taxes and passage of tax cuts for married couples.
Pete Jeffries, a spokesman for Mr. Hastert, said yesterday that Mr. Armey had proposed a novel idea.
"We are always looking to pass and enact meaningful tax relief sooner rather than later," Mr. Jeffries said.
Some conservatives have worried that passing several small tax bills will endanger momentum for a larger tax-cut plan.
Mr. Armey's memorandum was, in part, intended to force broader tax cuts back into the discussion, said one Republican leadership aide.
The part of Mr. Bush's tax-cut plan Mr. Armey would take up immediately would reduce by 2006 both the 39.6 percent and 36 percent marginal tax rates to 33 percent. In the same time frame, the 31 percent and 28 percent marginal tax rates would be cut to 25 percent.
The rate for the 15 percent bracket, which applies to the first $27,000 of income for a single taxpayer, would not be lowered. But Mr. Bush would create a new 10 percent tax bracket that would apply to the first $6,000 of a taxpayer's income.
Unlike Mr. Bush, who proposed phasing in those tax cuts after Dec. 31 this year, Mr. Armey would make them retroactively effective to Jan. 1, "so the impact can be felt immediately."
Over the past year, as the sizes of projected budget surpluses have increased, Democrats have been willing to endorse larger tax cuts, but always substantially smaller than those envisioned by Republicans.
Democratic aides said yesterday that Democrats still intend to back an income-tax cut, but that such a bold pronouncement from Mr. Armey delivered only to Republicans did not bode well for bipartisanship.
"Congress should enact some permanent tax cuts, not because we need them to rescue the economy, but because middle-income Americans and people who have been left behind by our prosperity need a tax break," Rep. Charles B. Rangel, New York Democrat, said in an opinion piece printed in Roll Call.
"The idea that massive back-loaded tax cuts are needed now because we might be entering a recession is not based on economic principles, but political opportunism," Mr. Rangel wrote.
The rate cuts, coupled with the IRA and 401(k) proposals Mr. Armey is suggesting, would cut taxes by about $900 billion over the next decade, according to estimates by the Joint Committee on Taxation.
As for concerns that a recession itself might not leave room in the federal budget for tax cuts, Mr. Armey argued "that the whole point of pro-growth tax relief is to avoid recession in the first place."


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