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Bush Emphasizes Job Creation Over Whittling Deficit

In Arkansas, president makes his case for a tax cut of $550 billion or more. The debate enters a crucial phase on Capitol Hill.

May 06, 2003|Maura Reynolds and Janet Hook | Times Staff Writers

LITTLE ROCK, Ark. — President Bush, faced with continued Senate resistance to his push for a tax cut of at least $550 billion, tried to ramp up political pressure on moderate Democrats Monday by arguing that it is more important to create jobs for the unemployed than to worry about the federal budget deficit.

"I'm concerned about the deficit," Bush told an audience of small-business owners and Republican supporters in Little Rock. "But I'm first and foremost concerned about that person looking for a job."

The president made his case as Congress enters a crucial period that could determine how the president's tax cut plan -- originally set at $725 billion over 11 years -- will be whittled to accommodate lawmakers concerned about the deficit.

Late in the week, the House is scheduled to approve a bill designed to cut taxes by $550 billion over 11 years.

But in the Senate, the figure was reduced to $350 billion to garner two key votes needed to pass a compromise bill. That figure would rule out including Bush's prized $396-billion initiative to eliminate taxes on dividends. But after a party caucus Monday, Republican leaders said they would find a way to include some version of dividend tax relief.

"We're going to have a very aggressive dividend part," Sen. Charles E. Grassley (R-Iowa) said on CNN. Before the caucus meeting, Grassley had been indicating he planned to omit dividend tax relief from the bill that he is to unveil today and push through his finance committee Thursday.

Grassley also said the bill would include more than $350 billion in tax cuts -- although the additional reductions would be offset with spending cuts or tax increases in other areas.

Having failed to persuade a few key deficit-conscious Republicans in the Senate to accept a bigger tax cut, Bush and his allies are trying to sway moderate Democrats. Arkansas is home to two of them: Sen. Mark Pryor, who took office in January, and Sen. Blanche Lambert Lincoln, who voted for Bush's 2001 tax cut.

"Congress needs to move. They need to move boldly," Bush said. "We don't need ... an itty-bitty tax relief plan. We need one that is strong and robust for the American worker."

Bush has been pushing his tax cut plan since January, but Monday marked the first time he asked Americans to telephone or e-mail their representatives in Congress to lobby for it.

"The message I hope you send is, the more tax relief, the more work is going to be available for your fellow citizens," Bush said. "I would hope you'd call the members of your congressional delegation to let them know what you think."

Pryor was unmoved in his opposition to a big tax cut. He also said he viewed it as ironic that Bush was visiting Arkansas to push for tax cuts the same day the state's governor was calling for a special session of the Arkansas Legislature, which may have to raise taxes to cover the state's budget shortfall.

Lincoln's view of the Bush tax plan demonstrates why his call for abolishing taxes on dividends is such a tough sell in the Senate. Lincoln, a member of the influential Senate Finance Committee, is open to the idea of some tax relief to stimulate the economy. She has agreed to meet soon with Commerce Secretary Don Evans, a principal lobbyist for the Bush plan.

But the dividend tax cut falls flat with Lincoln because only 7.8% of Arkansans reported dividend income in 2000. Also, she argued that the cuts in upper-bracket income tax rates that are part of Bush's plan mean little to her state, where 80% of taxpayers have an adjusted gross income of less than $50,000.

"I agree with the president's intention to stimulate our sluggish economy," Lincoln said in response to Bush's visit to her state. "I just differ with him over what aspects will actually benefit the people I represent."

Instead, she wants to focus on other elements of the president's plan, such as expanding the lowest income-tax bracket, providing tax cuts for small businesses and increasing tax relief for married couples and families with children.

Additionally, Lincoln and other centrists from both parties have been insisting on an element not included in the Bush plan: aid to financially strapped states. That proposal also is crucial to another swing vote on the finance committee, Sen. Olympia J. Snowe (R-Maine).

A key question for Grassley as he struggles to get a bill out of his committee is how to include some form of dividend tax relief to please conservative Republicans without losing support from Snowe. She has backed a compromise that would put a cap of $1,500 or less on how much dividend income is not taxed.

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