Bush sends his tax-cut plan to Congress


AP

President George W. Bush is sending his US$1.6 trillion, 10-year tax-cutting proposal to Congress, where a fight is brewing over its scope. The president is adamant that the plan is the “right size,” warning Democrats and Republicans alike not to make substantial changes.

In a Rose Garden ceremony Thursday, Bush was formally transmitting the outlines of the plan to Capitol Hill. Scores of Hispanic business and community leaders were joining him.

The plan closely mirrors the cuts that Bush made the centerpiece of his presidential campaign, including reducing income-tax rates, easing the marriage penalty, phasing out the estate tax and boosting tax breaks for charitable contributions.

The president wants congressional tax writers to use it as a guideline for the legislation they will write, and he was dispatching Treasury Secretary Paul O’Neill to the Capitol on Thursday to deliver the plan to eager Republican leaders.

“The liberation of the American taxpayer has begun,” House Majority Whip Tom DeLay, a Republican from Texas, said Wednesday.

Bush has devoted his third week in office to cajoling skeptical Democrats into supporting the tax cuts. They say the measure is weighted far too heavily toward the rich, who pay most of the taxes.

Bush said it was “fair that everybody who pays taxes should receive relief, and that’s why we drop all rates.”

And reflecting the tax cut’s political momentum, Democrats who last year were supporting 10-year tax cuts of roughly US$300 billion now say cuts of three times that size are justified. They hope to issue their own alternative soon.

To pressure the lawmakers, Bush also has staged a series of events with “regular folks” meant to build public support. The White House argues that the average tax cut for a family of four would be US$1,600 a year under Bush’s plan.

Wednesday evening, looking for congressional backing, Bush summoned nearly two-dozen members of the tax-writing House Ways and Means Committee to the White House.

Nearly all were Republicans; the gathering appeared to be an attempt by Bush to win over the outnumbered Democrats in the Cabinet Room. One lawmaker in the meeting said that if a vote were held today on Bush’s plan, the House would likely split along party lines. Republicans hold a 221-211 advantage over Democrats in the House.

Several Democrats interviewed after the White House session said they were unswayed by Bush’s pitch.

“We agreed to disagree,” said Rep. Richard Neal, a Massachusetts Democrat. “We disagree on the sheer size.”

Bush faces another problem from within his own party. Some Republican members of Congress are pushing for broader cuts.

In a memo, House Majority Leader Dick Armey, a Texas Republican, said “returning US$1.6 trillion or even US$2.6 trillion to the people who earned the money is not unreasonable.”

Playing traffic cop, Bush cautioned both sides to slow down.

“For those who want to diminish the size of the tax cut, that would be inadvisable,” the president said Wednesday. “And for those who want to increase the size of the tax cut, it would be inadvisable. It’s the right size.”

Bush would pare the current five tax brackets to four. He also would cut taxes from today’s rates of 15 percent to 39.6 percent to between 10 percent and 33 percent. The president also would expand child credits, ease the so-called marriage penalty and gradually repeal estate taxes.

Bush’s plan is focused far more heavily on individuals than on businesses. As a result, many Republicans, particularly in the House, favor enlarging the package by adding breaks for companies.

To justify the increases, they cite the economy’s recent lethargic pace and skyrocketing estimates of budget surpluses, which the nonpartisan Congressional Budget Office said last week could reach US$5.6 trillion over the next decade.

Others have said that more of the projected federal budget surpluses would be best used to pay down the US$3.4 trillion of the national debt held by the public.

Bush acknowledged the argument and said his plan does pay down the debt.

But he reiterated his contention that tax cuts could help Americans pay down their personal debts.

Bush also promised to submit a budget that “sets aside all the payroll taxes for Social Security, a budget that sets clear priorities, a budget that pays down the national debt and a budget that has got room for meaningful, substantial tax reduction.”