WASHINGTON – Concerned about rising voter anxiety about the economy only weeks before a crucial election, House Republicans on Tuesday began pushing a pair of tax cuts for investors whose retirement accounts and stock portfolios have suffered from the stock market swoon.
While the bills cleared a committee hurdle Tuesday and will probably pass the GOP-controlled House, the Senate is unlikely to act on them, given that the Democrats running the Senate contend its main purpose is as a campaign message.
But with the Nov. 5 vote fast approaching and control of Congress at stake, Republicans said the bills would be modest medicine for investors.
"While the fundamentals of our economy are solid, there is more we can do to help build the confidence and restore the losses of America's investors," said Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee, which approved both bills along party lines Tuesday.
House Republicans decided to act after President Bush backed away from investor relief legislation amid internal White House divisions earlier this year. The Treasury Department issued a statement saying the bills would "help to bolster investor confidence and ... boost job creation," but stopped short of an outright endorsement.
The GOP, Democrats contend, is only pushing the bills as a last-minute effort to appear sensitive to voters' rising worries about unemployment, shaky pension funds and the deep stock market swoon.
"They've presided over a terrible economic downturn, and now they want to pretend like nothing is wrong," said Rep. Martin Frost, D-Texas.
In the Senate, Majority Leader Tom Daschle announced an "economic forum" on Friday with economists in another effort to highlight problems Democrats say the GOP isn't addressing. Daschle, D-S.D., said lawmakers should first pass a 13-week extension of unemployment benefits before they expire for an estimated 1.5 million people.
"We need leadership on the economy," Daschle said. "We're hoping to ignite that debate."
The House GOP legislation would increase the tax deduction for investors' net capital losses from $3,000 -- a level first set in 1978 -- to $8,250. The change would be effective from the beginning of 2002, meaning investors could deduct a higher level of losses suffered this year on tax returns they file next April.
Democrats said this could spark a stock sell-off, further depressing the markets later this year, and would primarily benefit wealthier taxpayers with annual incomes above $150,000 for a married couple. In addition, some lawmakers noted that investors can already deduct all current losses in future years, only in smaller chunks.
"I just question whether this is necessary," said Rep. Gerald Kleczka, D-Wis. "We just keep passing these tax bills and passing them, and we don't give a hoot about the economy."
The second GOP bill would gradually raise the age at which retirees must begin mandatory withdrawals from 401(k) and individual retirement accounts from 70 to 75 by 2007, adding a few years to rebuild lost value. It would also increase, in 2003, tax-advantaged contribution limits to $5,000 for IRAs and $15,000 for 401(k)s; current law raises the limits to those levels over the next few years.
Rep. Rob Portman, R-Ohio, said the age limit, in place since 1962, is a hardship for the increasing number of people who want to work beyond age 70 without losing value in their retirement accounts.
"They don't want to outlive their retirement. That's going on in the real world," Portman said.
Only about 3 percent of people with retirement accounts currently contribute the maximum amount, raising questions about how much the higher limits would help. And Democrats noted that senior citizens without other sources of income would be unlikely to wait until age 75 to begin withdrawals.
"If that senior needs that money, he's going to have to take it out anyway," said Rep. Robert Matsui, D-Calif.
The combined cost of the bills, about $65 billion over 10 years, is also an issue. The federal budget ended fiscal 2002 on Sept. 30 about $167 billion in the red, supplanting previous projections for a surplus. Neither House bill contains spending cuts or tax increases to offset the cost.
Many Democrats said they could support the measures only if they were offset. "The deficit will grow, and grow, and grow," Kleczka said.