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News & Views |The Battle Begins: Gramm, Miller Introduce $1.3 Trillion Tax Cut BillWednesday, January 24, 2001 OnLine Congress heard the opening salvo of the tax cut battle
on January 22, when Democratic Senator Zell Miller of Georgia joined
Republican Senator Phil Gramm of Texas in introducing key provisions of
President George W. Bush's $1.3 trillion tax cut as outlined during the
presidential campaign. Miller's support for the tax cut package set off alarms
among Democratic leaders, including Senate Minority Leader Tom Daschle, D-S.D.,
who want targeted tax cuts worth roughly half the $1.3 trillion called for
by Republicans. In particular, they worry that other conservative
Democrats may follow Miller's lead. "Some of my colleagues talk of 'targeted' tax
cuts, and I respect their opinion. I respect them," Miller said at
the press conference held to introduce the tax cut bill. "But most
importantly . . . I agree with President Bush that the taxpayers are much
better judges of how to spend their own money than we are." What It Does -- The legislation would reduce
marginal tax rates to four rates of 10 percent, 15 percent, 25 percent,
and 33 percent from the five current rates of 15 percent to 39.6 percent.
It would also phase out the estate tax, ease the marriage penalty,
increase the contribution limits for education savings accounts, make
permanent the research and development tax credit, and double the child
tax credit. However, this bill is only the starting point, and the
final version of any significant tax legislation will probably look very
different. Several competing pressures will force changes to this opening
gambit. These include the budget numbers, tax initiatives that Congress
started last year that remain unfinished, and the political realities of
tight margins in the House and the Senate. Senate Democrats Unveil
Tax Priorities -- Democrat leaders put forward different tax
priorities on January 22 when Daschle unveiled a
bill designed to "deliver tax relief to hard-working families across
the country." According to Democrats, the Working Family Tax Relief
Act of 2001, S. 9, would help families pay for college, save for
retirement, and pay for long-term health care. It would also effectively
eliminate the marriage penalty tax, eliminate the estate tax on more than
99 percent of estates, expand the Earned Income Tax Credit, and expand
childcare tax credits, Daschle said. Cost estimates for the bill are not
yet available. Democrats are willing to
negotiate with the Bush administration and congressional Republicans as
long as the bulk of the tax relief goes to middle-class working families
and any tax cut enacted is affordable and fiscally responsible, Daschle
said. "The efforts we've made to restore fiscal discipline these last
eight years have resulted in lower interest rates, record-high job
creation, and record-low unemployment," Daschle added. "We
cannot squander those gains by going back to the old days of
deficit-spending." The battle has just begun. Taking Miller at his word
and assuming that otherwise, the Republicans and Democrats vote as a
block, the Senate is still split just 51-49 in favor of Bush's tax cuts --
too few votes to override a filibuster. Moreover, the ultimate size of any
tax break will be affected by new surplus projections as well as the
budget proposals for the next fiscal year, which typically are finished
before any tax cut legislation is considered. Already, congressional
leaders have indicated that a tax bill will most likely be passed by mid-
to late summer. |
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Congressional Initiatives
Not in the Bush Plan -- Bush and
congressional Republicans will have to factor in other issues as they
consider their strategy for promoting the $1.3 trillion tax package. Last session, members on both
sides of the aisle pursued pricey priorities such as the telephone excise
tax repeal, the patient's bill of rights, pension expansion, Social
Security tax relief, and small business tax relief. Taking into account
the over $400 billion, 10-year cumulative cost of these initiatives, the
$1.3 trillion Bush plan, and the new projected budget surplus numbers,
some of these measures will likely be passed over in an effort to balance
the government's books. Hatch, Baucus Introduce Permanent R&D Credit --
Senate Finance Committee members Orrin Hatch, R-Utah, and Max Baucus,
D-Mont., introduced a separate bill, S. 41, on January 22 that would make
permanent the research and development (R&D) tax credit. According to
press reports, the bill, which comes with a 10-year price tag of roughly
$25 billion, would increase the alternative incremental research credits
rates. Current co-sponsors include all
Finance Committee Democrats, as well as Sens. James Jeffords, R-Vt.;
Olympia Snowe, R-Maine; and Jon Kyl, R-Ariz. President Bush supports
making the credit permanent. Senate Approves O'Neill --
As expected, the Senate Jan. 20 approved by voice vote the nomination of
Paul O'Neill as the new Secretary of the Treasury. |
Bush Puts Recent Clinton Guidance on Ice, Pending Review President Bush's chief of
staff, Andrew Card, issued an order to all executive departments and
agencies on January 20 temporarily suspending the publication of proposed
or final guidance in the Federal Register until the guidance has been
reviewed and approved by a department or agency head appointed by the
president. For regulations that have
already been published but have not yet taken effect, the order
temporarily postpones the effective date of the guidance for 60 days. To
date, all of the proposed and final regulations filed by the IRS have
already been published in the Federal Register. This order will not affect
guidance that is published in the Internal Revenue Bulletin such as
announcements, notices, revenue rulings, and revenue procedures.
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