- The Washington Times - Wednesday, May 21, 2003

House Republicans yesterday said they will accept a final tax cut totaling about $350 billion over 10 years — a far cry from the $726 billion the president first proposed or the $550 billion plan the House passed several weeks ago.

“Using Chairman Grassley’s words, the net number’s always going to be $350 billion; the gross number may be higher,” said House Majority Leader Tom DeLay, Texas Republican.

Senate Finance Committee Chairman Charles E. Grassley, Iowa Republican, had to promise two Republican senators last month that he would not allow a bill with a net worth of more than $350 billion to come back for a final vote in the Senate.

Mr. Grassley and House Ways and Means Committee Chairman Bill Thomas, California Republican, were meeting last night to decide on a final tax-cut total and construct a package that leaders want to vote on and send to President Bush by the end of this week.

The Senate on Thursday passed a bill that included about $420 billion in tax cuts and $20 billion in aid to states. But this $440 billion loss to the government would be offset with $90 billion in revenue increases, keeping the overall size of the bill at $350 billion.

The House had passed a $550 billion bill, which had no state aid and no revenue increases.

But after a meeting between top House and Senate Republicans and the president at the White House on Monday, they said the smaller number still allows for a good bill.

“I think we can do a package that will actually end up being one of the [three] largest tax cuts in the history of the country and that will have a very stimulative effect, as well as the growth component,” Mr. DeLay said.

The principal issues for congressional negotiators to finesse are:

• Whether the House will accept the Senate’s revenue increases and state aid.

• Whether the Senate will accept the House’s proposed cut in capital-gains taxes.

• Which chamber will prevail on the method of reducing the taxes that individuals pay on corporate dividends. The Senate proposal has a temporary repeal of the tax, while the House bill reclassifies dividend income as capital gains and thus taxes it at a much lower rate.

Republicans said the package will be developed between Mr. Grassley, Mr. Thomas and the chambers’ leaders. Once an agreement is reached, a conference committee would get the bill for approval, and both chambers plan to pass the bill and send it to the president by week’s end.

House aides also said their chamber probably will have to accept the Senate’s provision of $20 billion in aid to states, but they believe the Senate will have to accept the House’s cut in the capital-gains tax. Also, House Republicans say the Senate will have to drop some of the offsetting tax increases it passed.

Officially, none of those issues has been decided.

“None of those decisions have been made yet. None of them have been presented to the conferees yet, even the proposals at this juncture. And that’s what we’ll see play out over the next 72 hours,” said Senate Majority Leader Bill Frist, Tennessee Republican.

The president, campaigning for his $726 billion tax cut proposal in Ohio several weeks ago, had called the Senate’s $350 billion tax cut “itty-bitty.”

A White House spokeswoman yesterday would not say whether the president signed off on the lesser figure, though congressional aides said administration officials know they must settle for something close to $350 billion.

The president also did not indicate a preference for the Senate’s or House’s version of the bill, with congressional aides saying he simply stressed the need to have a bill on his desk soon.

Complicating matters, Democrats said congressional analysts now figure the bill that passed the Senate would be worth more than $350 billion.

Minority Leader Tom Daschle, South Dakota Democrat, said the difference is in “the tens of billions of dollars,” and given that some Republicans have insisted no bill go above $350 billion, he said it could complicate the conference.

Democratic opponents of the president’s plan remain just as opposed, regardless of the final number. Yesterday, they accused Republicans of relying on budget gimmicks to pass their bill at $350 billion.

“To the extent this is a victory for the administration, it is a defeat for working taxpayers,” said Rep. Charles B. Rangel, New York Democrat and ranking member of the Ways and Means Committee.

Conservative Republicans who had hoped for a bigger tax cut said they were disappointed, but they also found sources of encouragement.

“I was hoping we would have a bigger number,” said Rep. Patrick J. Toomey, Pennsylvania Republican and head of the conservative Republican Study Committee’s budget task force. But he said just as important as the overall size is the composition of the package, and he said there are indications a good package can still come out of the agreement.

For Mr. Toomey and other conservatives, one attractive option is to eliminate the double-taxation of dividends temporarily and hope that future Congresses extend it.

Said Sen. Lindsey Graham, South Carolina Republican: “I’ve got a goal, and that is to take dividends to zero for at least a three-year period and take taxes down across the board. If that can’t be met, I don’t think we’ve done a good job.”

And Grover Norquist, president of Americans for Tax Reform, said the tax cut has to be seen in the context that the president has proposed major tax cuts every year so far, and Mr. Norquist said he expects that pattern to continue.

“If this was the last tax cut of our lives, we’d be unhappy. If this was the last tax cut of the first Bush administration, we’d be unhappy. But this is the third tax cut of four in the first Bush administration,” he said, adding that he expects more in a second Bush term.

Mr. DeLay said he hopes to be back sooner, with “one or two packages, probably this summer, and give the Senate more opportunities to do more.”

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