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THE FEDERAL BUDGET

Broader, Faster Tax Relief Measure Expected to Get House Panel Backing

March 01, 2001|JANET HOOK | TIMES STAFF WRITER

WASHINGTON — Moving briskly to enact the cornerstone of President Bush's big tax cut proposal, a powerful House committee is set today to approve a bill that would slash income tax rates across the board and provide relief even more quickly than Bush has sought.

The measure, expected to clear the House Ways and Means Committee on a party-line vote and then pass the full House by the end of next week, would cut the lowest income tax rate from 15% to 12% for 2001--a year earlier and 2 percentage points lower than Bush has proposed.

The bill would benefit all taxpayers, because the lowest tax rate applies to a portion of their taxable income. Under the measure, married couples would see their 2001 tax bill cut by up to $360 and singles would see up to a $180 decrease.

The bill would cut rates for higher income brackets beginning in 2002 and provide a total of $958 billion in tax relief over 10 years.

House Republican leaders have pushed for unusually quick votes on cutting income tax rates because they think such reductions would provide the greatest benefits to the flagging economy.

"It is important that we get started right away to speed relief to American workers who are concerned about the layoffs and the cooling economy," House Ways and Means Chairman William M. Thomas (R-Bakersfield) said. "Taxpayers should not have to wait any longer for real relief."

Other elements of Bush's $1.6-trillion tax cut plan--such as repeal of the estate tax and reduction in taxes on married couples--are more narrowly targeted and considered less likely to stimulate the economy. House action on these other elements will be considered in separate legislation during the spring.

The expedited House action gives Bush's plan a boost at a time when its momentum seems to be flagging in the Senate. In that chamber, which is divided evenly between the two parties, some moderate Republicans have expressed qualms about the size of the president's tax cut. With the vast majority of Senate Democrats also opposing the plan for that reason, its prospects for Senate passage are in doubt.

"If the vote were taken today, George Bush would not pass his . . . tax cut," said Senate Minority Leader Tom Daschle (D-S.D.).

Still, GOP congressional leaders are hoping that a tax cut plan close to Bush's overall package will be passed by both chambers by July 4.

The House bill, authored by Thomas, represents the first effort by the GOP-controlled Congress to put its own imprint on the Bush plan. It also begins the delicate process of trade-offs between the priorities of lawmakers and the president's goals.

By accelerating part of the rate cut, Thomas' bill would add about $65 billion to the cost of the Bush proposal. Thus, a key question becomes how other provisions of the plan would be delayed or shaved to keep the federal government's revenue loss to Bush's target of $1.6 trillion over 10 years. Thomas would say only that his committee would examine "alternative ways to meet the same goals" Bush laid out that would cost less.

Trimming the income tax rates across the board is the major component of Bush's plan. Under his proposal, the current tax rates of 15%, 28%, 31%, 36% and 39.6% would drop gradually over five years, beginning in 2002. At the end of that period, there would be four rates: 10%, 15%, 25% and 33%.

Thomas' bill would reach the same goal after five years, but with the key change of cutting the lowest tax rate more quickly. Now, all taxpayers pay 15% tax on the first $27,050 of income they earn ($45,200 for married couples). The House bill would set a 12% tax rate for the first $6,000 of income ($12,000 for married couples) in 2001 and 2002. That rate would drop to 11% in 2003-05 and 10% in 2006.

House Democrats complained bitterly that Republicans were giving the "bum's rush" to a major debate by seeking to jam the rate-cut bill through the chamber before Congress agreed to an overall budget. Democrats argue quick action on the tax cut could preempt decisions to use the surplus for other priorities, such as reducing the national debt, reforming Social Security and Medicare and other spending initiatives.

"Let's have a discussion of the competing priorities," said House Minority Leader Richard A. Gephardt (D-Mo.). "Running this tax bill out on the floor . . . really decides the budget."

Democrats are preparing to offer an alternative tax cut plan that would be about half the size of Bush's and targeted more on middle-income taxpayers. Although the details were still being drafted Wednesday, Democrats are expected to propose a smaller cut in income tax rates that leaves upper bracket rates untouched, some relief for people who pay payroll taxes but not income taxes and reductions in the estate tax and in taxes on married couples.

Despite Bush's call for a new civility in Washington's political discourse--an appeal he repeated in his address to Congress on Tuesday night--the political skirmishing in the tax cut debate is heating up.

House Speaker J. Dennis Hastert (R-Ill.) suggested that Democrats were trying to delay action on the tax cut because it would be "politically convenient" for them to push the country into a recession. Thomas said Gephardt "would like to discuss this issue all summer while the economy goes into the tank."

Gephardt responded that there was no basis for the attacks.

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Complete Times coverage of the tax cut debate and other information on taxes can be found at: www.latimes.com/taxes.

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