- The Washington Times - Friday, May 23, 2003

Congress today will pass the third-largest tax cut in history, which President Bush yesterday said he will sign although it is less than half the size he initially sought.

The $350 billion bill was approved by House and Senate Republicans in conference yesterday, after several days of negotiations, during which the House pushed for a larger tax cut but senators insisted that no bill worth more than $350 billion could muster the votes to pass their chamber.

The compromise bill is set to pass the House overnight and the Senate today. It will then go to the president, who after a meeting with House and Senate Republicans yesterday, said he will accept it.

“This bill I’m going to sign is good for American workers, it is good for American families, it is good for American investors, and it’s good for American entrepreneurs and small-business owners,” he said.

Republicans said the bill, which mixes a temporary dividend-tax cut and cut in the capital-gains tax with a faster reduction in income-tax rates and expedites the child tax credit, packs more punch in the first few years than previous proposals, and thus will be a real stimulus bill and create jobs and return money to taxpayers.

“Voting for this measure is a vote to put around an extra $1,000 into the pockets of a family of four with two children for the next couple of years,” said Sen. Charles E. Grassley, Iowa Republican and chairman of the Senate Finance Committee.

“This bill underscores the president’s and the majority’s belief that this is the people’s money first, not the government’s,” Mr. Grassley said.

The bill reduces the tax on dividends and capital gains, taxing both at 15 percent for higher-income taxpayers and 5 percent for lower-income filers, through 2008. In that year the lower-income tax will go to nothing. But the year after that, the tax would be reimposed at today’s 20 percent rate for higher incomes and 10 percent for lower incomes.

Mr. Grassley and other Republicans said yesterday that they will fight to make the temporary changes permanent.

Democrats said that amounted to a “roller coaster type of tax policy.”

“Taxes go down, and taxes go back up. Exemptions go up, and exemptions go back down,” said Sen. John B. Breaux, Louisiana Democrat.

Yesterday’s official House-Senate conference to approve the compromise bill was more confirmation than legislative give-and-take, because the details had been worked out in advance, and no amendments were offered.

The lawmakers were packed into a small room, which Democrats joked was a deliberate move by Republicans because it meant fewer people could see what was going on.

Sen. Max Baucus of Montana, the top Democrat on the Senate Finance Committee, boycotted yesterday’s official conference because Republicans had done all the negotiations in their own pre-conference meetings.

“I wasn’t part of the conference, so why be part of the conference?” he asked. “I was never consulted. No Democrat was ever consulted, except the two or three they were working on to get the votes.”

In the end, the two House Republicans and four Senate Republicans on the conference signed the conference report, constituting a majority, but none of the Democrats did.

“You may have the votes, but I think you’re losing a lot more today than you realize,” said Sen. John D. Rockefeller IV, West Virginia Democrat.

The president proposed a $726 billion, 10-year tax cut in January. About half the value of the tax cut came from ending the tax that individuals pay on income from corporate dividends. The House had passed a $550 billion tax cut that reduced the tax on dividends by treating them as capital gains, then reducing the tax on capital gains throughout the 10 years of the bill.

Senate Republicans, constrained by a promise leaders had made not to permit a bill worth more than $350 billion to pass, countered with a proposal that eliminated the dividend tax within four years but then reimposed it to meet budget constraints.

To help control the cost, the bill also raised some taxes and continued certain expiring fees. Their bill also directed $20 billion in aid to states, something needed to obtain key votes.

In negotiations during the past few days, it became clear that key senators would not move to more than $350 billion and that House members would not accept any tax increases.

On Wednesday night, after meetings mediated by Vice President Dick Cheney, Republican leaders struck a deal they said can pass both houses. It adopts the House dividend and capital-gains proposal, adopts the Senate cost figure and state aid, and removes the tax increases that the Senate proposed.

Senate Minority Leader Tom Daschle, South Dakota Democrat, said the bill will shortchange spending priorities without stimulating the economy.

“We are going to be spending Social Security and Medicare dollars for every dollar that is used in this particular tax cut,” he said. “We’re actually going to be taking money from education, taking money from homeland security, to pay for the tax cut that the Republicans are now agreeing to. A typical South Dakotan will receive less than $100.”

He also said Democrats have done what they could to derail the bill and said the proof is how tough it was for Republicans to pass a bill.

“This was not easy,” he said. “They have done a triple back flip over the high board, and they’ve created a belly-flop that all of us are going to feel. And that was what they did to get to this point. That, in part, is because we fought as hard as we did. We’re satisfied that we could do no more, fight no harder.”

House Majority Leader Tom DeLay, Texas Republican, said Democrats can blame only themselves for their lack of input.

“The Democrats chose not to participate in the process from the very beginning. They informed the nation that all they wanted to be is against something. They didn’t want to be for anything,” he said. “When you do that you become irrelevant, and you’ve checked out of the issue.”

Republicans also gave full credit to Mr. Bush for following his $1.3 trillion tax cut in 2001, the largest in history, with the latest tax cut, the third largest.

“The Democrats tried to stop it in every way. He was able, through his political popularity, to get it passed,” said Sen. Lindsey Graham, South Carolina Republican.

In addition to adding jobs, Mr. DeLay laid out an additional measure for success: He predicted that the stock markets will react positively and immediately to the bill’s passage.

“The cost of capital is just going to spurt capital movement, which we desperately need right now. I guarantee the stock market will reflect that the minute we pass” the bill, he said.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide