WASHINGTON – House Republican leaders on Wednesday began sketching out an economic plan heavy on growth-stimulating ideas such as a reduction in capital gains taxes. Democrats focused on a new round of income tax rebates, an idea also gaining attention at the White House.
House Majority Leader Dick Armey, R-Texas, said the GOP package could cost well over the $75 billion upper limit suggested by President Bush and would likely be dominated by a blend of temporary and permanent tax cuts, rather than the spending programs many Democrats want.
"We must have a singular agenda as we develop this bill, and it's economic growth," Armey said. "We will not be able to do everything."
Armey and Rep. Rob Portman, a key Bush ally on Capitol Hill, said the emerging package could include a cut in the 20 percent long-term capital gains rate for investments made after the Sept. 11 terrorist attacks. That would discourage an immediate broad stock sell-off that would drive the market lower.
"The incentive would be not selling, but buying," said Portman, R-Ohio.
Other key House GOP items include a repeal of the corporate alternative minimum tax -- also favored by the president -- and a new expensing provision allowing businesses to write off up to 30 percent of investments over a three-year period.
Another proposal mentioned by Armey and Portman would allow businesses to deduct current losses against past profits as far back as five years. There is also support for the president's desire to accelerate some of the income tax cuts in the 10-year, $1.35 trillion tax relief package so they take effect in 2002.
Rep. Bill Thomas, chairman of the tax-writing House Ways and Means Committee, said the panel could begin assembling the measure as early as Friday. Thomas, R-Calif., said he intends to put the bill together in an open process, starting with a nearly blank slate and putting each Democratic and Republican idea to a public vote.
"Decisions behind closed doors ought to be over," Thomas told reporters.
These moves suggest that House Republicans will not wait for a negotiated deal with Democrats and the Senate on the stimulus plan. The upshot is that the initial measure will have a heavy GOP tint but will also probably change when a final compromise is reached with the Democratic-led Senate.
After a breakfast meeting with President Bush, House Minority Leader Dick Gephardt, D-Mo., said Democrats mainly want a new round of rebate checks for low- and middle-income workers who did not get one this summer. About 34 million workers did not receive a check, most because their main federal tax liability is the payroll taxes that fund Social Security, not income taxes.
"It could be a $300, $400 check to them," Gephardt said. "That would help them in the holiday season."
Although House Republicans are cool to the rebate idea, it gained currency Wednesday at the White House. A senior administration official, speaking on condition of anonymity, said Bush has told lawmakers he prefers rebates for people who either didn't qualify for checks the first time or got less than the full amount. That could cost up to $35 billion, according to unofficial estimates.
There remain many Democrats, and some Republicans, who favor dividing the stimulus plan evenly between taxes and spending. In addition to greater unemployment benefits than Bush has outlined, House Democrats want to help laid-off workers pay health insurance premiums and enhance Medicaid benefits.
Rep. David Obey, senior Democrat on the House Appropriations Committee, circulated a draft proposal for up to $75 billion in spending, ranging from security improvements to highway construction projects.
House Republicans signaled they would not entertain major new spending proposals in their version of the stimulus plan.
"I don't know what that would have to do with helping the economy over the next 12 months," Thomas said.