- The Washington Times - Friday, March 23, 2001

Senate Finance Committee Chairman Charles E. Grassley says he would raise the top tax rate in President Bush's tax-cut plan and accept a trigger that ties the cuts to future surpluses to win Democratic support.

Mr. Grassley also said that he intends to make more of the plan's tax cuts effective this year perhaps $60 billion to $70 billion worth in order to give the sagging economy a bigger, earlier stimulus through a taxpayer rebate or lower paycheck withholding that could begin the first week in August.

The House-passed income-tax-cut bill, by comparison, would provide only $5.6 billion in tax cuts this year which critics say is minuscule in a $10 trillion economy.

He also said that he now expected, as a result of personal conversations with some key lawmakers, that "at least six or seven Democrats" will join Republicans to pass a tax-cut bill in the Senate.

"Some version of a trigger or midcourse correction, or whatever you want to call it, probably not only will be included but is probably almost an absolute necessity for it to be included in order to get the votes," the Iowa Republican said.

"I don't like a trigger, but I think it's something I can live with. It is almost something I'll have to live with," he said in an interview with The Washington Times on Wednesday evening in which he revealed for the first time how he intends to reshape the House-passed income-tax-cut bill to get it through his evenly divided committee and an equally divided Senate.

Mr. Grassley said that in reaching out for bipartisan support, he may also have to readjust the rate reductions in Mr. Bush's tax cut proposal, including a drop in the current 39.6 percent top tax rate to 36 percent instead of the lower 33 percent tax rate the president wants.

Asked if he favored making the higher bracket tax cuts less steep than that proposed by Mr. Bush, as desired by some Democrats, Mr. Grassley said, "I would agree with the Democrats to the extent to which they feel that some rate reductions are greater than other rate reductions."

"And I think it ought to be equal rate reductions. You could do that by maybe going down to 36 percent [in the top tax bracket] and doing away with the [tax deduction] phase-outs at the higher income levels so that we would be doing rate reductions about the same for each" income tax bracket, he said.

The White House is staunchly opposed to both changes. Mr. Bush has made the idea of lowering the top tax rate to 33 percent the fiscal mantra of his economic recovery plan, saying that "no one should have to pay the government more than one-third of their income."

The president has also repeatedly rejected the idea of a trigger mechanism which would make the future tax cuts contingent upon whether the surpluses come in at the levels that have been forecast as many Democrats and some centrist Republicans propose.

Karl Rove, the president's political adviser, said earlier this month that any trigger mechanism "is dead on arrival with this president."

The House bill contains no such trigger mechanism and would cut the income-tax rates across-the-board just as Mr. Bush proposed.

But Mr. Grassley suggested that there were ways to write a trigger provision that would not be offensive to the White House and he said that Sen. Phil Gramm, Texas Republican and a key member of his committee, was working on some trigger language that the committee would consider.

"You've got to make sure that there are no incentives in there for the big spenders to spend more money to spend us into an automatic kicking in of the trigger," Mr. Grassley said.

"It ought to include a provision that says if you have more income coming in than you anticipated, you speed up the tax reductions. There's got to be some way of saying that if we're going into a recession, there ought to be some expedited process for Congress to short-circuit a tax increase if it's going to be economically catastrophic. And I would want to include a presidential waiver," he said.

"Whatever it takes to get tax rate restructuring has to be my No. 1 goal," he said, noting that his 20-member panel was split 10-10 between Republicans and Democrats and that he was going to have to modify the Bush tax-cut plan to win Democratic support and "keep some nervous Republicans happy."

He said that he would support some kind of "a trigger that does not do damage to the long-term beneficial aspects of tax restructuring."

Mr. Grassley also said that, in the end, he expected a number of Democrats to support the tax-cut plan because of growing public concern about the plunging financial markets and the weakening economy that has increased political pressure on lawmakers in both parties to keep the economy from slipping into a recession.

"We've got reason to believe that six or seven Democrats will be on our side and with this plan being an economic stimulus, they don't want to be seen standing in the way of rejuvenating the economy," he said.

After a week of sharp selloffs on Wall Street and increased demands that Congress move more quickly on its economic agenda, Mr. Grassley said that he has dramatically accelerated his schedule to get a tax-cut bill to the Senate floor in early May. He added that if the economy worsens, he will move to act even sooner.

"I think we can get a bill out of our committee in the first two weeks of May, get it through the Senate, get it through a House-Senate conference [to iron out differences] and then get a bill to the president by Memorial Day," he said.

But as important as he thinks tax reductions are to long-term economic growth, Mr. Grassley believes that any early economic stimulus that might arise from the tax cuts this year "is a spit in the ocean compared to what monetary policy does."

"If [Fed Chairman] Alan Greenspan had stayed on his policy of managing money supply, which he did from the time he became chairman to the middle of the Clinton terms, instead of worrying about inflation over the last four years, we probably wouldn't have this mess we're in right now," he said.


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