- The Washington Times - Thursday, May 8, 2003

A critical week for the House and Senate tax-cut bills began in earnest yesterday, with House Republicans passing their plan through the Ways and Means Committee, though Senate Republicans are still searching for enough support to pass their plan.The Ways and Means Committee voted 24 to 15 along party lines to pass the bill and send it to the House floor. It is scheduled for a full House vote Friday.Republicans said the bill, coming on top of the $1.3 trillion tax-cut package passed in 2001, will put the economy back on sound footing.”The 2001 bill has us treading water. This bill, hopefully, will allow us to move forward. You have to look at both of them together,” said Rep. Bill Thomas, California Republican and chairman of the Ways and Means Committee.President Bush initially proposed a $726 billion tax cut that accelerated planned tax-rate cuts and the child tax credit, as well as ending the tax individuals pay on income from corporate dividends. That money is taxed as corporate earnings, and the president has argued that to tax it again is not fair.The House plan, which costs $549 billion, does not phase out the double tax but treats individuals’ income from dividends like capital gains. The plan also reduces the tax on capital gains to 5 percent for lower-income earners and 15 percent for higher-income earners, and it includes the acceleration of the tax-rate cuts the president sought.House aides said the plan will pump $60 billion into the economy in 2003 and $200 billion in its first two years.Democrats, however, said that passing the tax cut would lead to $1 trillion in costs and increase the debt. They said the tax cut would keep the government from meeting its other obligations.”This has nothing to do with jobs. This has nothing to do with economic growth. It has everything to do with making certain the resources are not there to fund programs Democrats historically have supported: Social Security, Medicare, education, affordable housing,” said Rep. Charles B. Rangel of New York, the top Democrat on the Ways and Means Committee.Meanwhile, Sen. Charles E. Grassley, Iowa Republican and chairman of the Senate Finance Committee, released the Senate Republicans’ proposal.It includes all the rate accelerations the president is seeking, and reduces the tax on dividends by a third in 2003, two-thirds in 2004 and eliminates it in 2005. But it would reinstate the tax in full in 2006.”A lot of times you walk before you run,” Mr. Grassley said, defending the Senate Republicans’ approach.But the plan is likely to be replaced because Mr. Grassley is still seeking to craft a bill that can find majority support on his committee. Sen. Olympia J. Snowe, Maine Republican and a member of the committee, said yesterday that she cannot support the proposal.She said that phasing out the dividend tax temporarily probably cloaks the true cost of the bill, because the temporary provisions are likely to be made permanent in the future, boosting the cost.”This proposal is not sound policy,” she said, adding that it is not clear whether the financial markets would receive it favorably.She has proposed capping the amount of dividend income taxpayers can exclude at $1,000, which she said would end double taxing of dividends for 88 percent of taxpayers.Mr. Bush indicated yesterday that both the House and Senate plans could be considered victories.”Both parties, in both houses of Congress, now recognize that tax relief helps create jobs,” he said.Also yesterday, Senate Democrats presented their own $124 billion tax cut, which they will offer as a counterproposal to the Republican plan.It would speed up elimination of the marriage penalty and payment of the child tax credit, and would offer rebates of $300 per person, as much as $1,200 per family, similar to the rebates in the 2001 tax cut. The package also includes sending $40 billion in aid to the states.


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