- The Washington Times - Friday, May 16, 2003

The House produced a $550 billion tax-cut proposal, the Senate struggled to create a $350 billion tax-cut proposal, and now the conference to work out the differences and send the president a final compromise could be the toughest part yet.

The bill that passed the Senate Thursday night 51-49 cuts the tax individuals pay on income from corporate dividends in half in 2003, eliminates the tax in 2004 through 2007, then restores it in 2008.

The House passed a bill last week that, rather than eliminate the tax, treats dividends as capital gains and reduces the tax on capital gains.

And though both sides are wedded to their own approaches, the bigger sticking point as they begin to work out the differences will be the Senate’s self-imposed $350 billion limit, something Republican leaders had to promise to win passage of their budget several weeks ago.

Senate Finance Committee Chairman Charles E. Grassley, Iowa Republican and the man who made that pledge on the Senate floor, said Thursday night that he will stick by it.

“I intend to keep my word,” he said. “Remember, without that agreement we wouldn’t be talking about tax policy. We’d still be arguing about the budget.”

Given that Mr. Grassley would lead the Senate delegation to a conference committee to iron out differences, House Republicans are talking about trying to avoid a conference. Instead, the two full chambers would vote on bills and pass them back and forth until they both pass a bill they agree on.

“We haven’t agreed yet whether we’re going to do this by way of House-Senate conference, pass another bill and send it to the Senate. There are a number of ways to peel the banana,” said Rep. Christopher Cox, California Republican and chairman of the House Republican Policy Committee.

Republican aides said the second option, called the ping-pong option, has been used, though sparingly.

“We want a process that will get us a final product above $350 billion,” one House Republican leadership aide said.

For now, the idea seems to remain a discussion among House members.

“We’re willing to listen to any proposals from the House side on getting tax relief enacted as soon as possible, but I haven’t heard anyone on the Senate side discuss not having a conference,” said Jill Gerber, a spokeswoman for the Senate Finance Committee.

President Bush proposed a $726 billion, 10-year tax-cut plan in January and as recently as a few weeks ago called the Senate’s $350 billion plan a “little bitty” tax cut.

But yesterday, asked whether he could accept the Senate plan, he said he is looking for the boldest package possible.

“The tax cut must be strong and robust so people will be able to find work,” he said.

In addition to the size of the overall bill and the makeup of the dividend tax cut, differences between the two bills include the Senate provisions of $20 billion in state aid, and about $90 billion in tax and fee increases. Those increases were needed to secure a bigger dividend tax cut and keep the cost of the bill to $350 billion.

Mr. Grassley said that from his standpoint, “everything’s on the table,” though he said the $20 billion state-aid provision probably has to remain. “I don’t see how we can pass a final bill without help for the states,” he said.

House Republicans, meanwhile, are fairly wedded to their capital-gains tax cut and steadfastly opposed to the tax and fee increases in the Senate bill.

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