Senate Republicans Work on Raising Tax Cut Limit

Senate Majority Leader Bill Frist (searchpromised Wednesday to work aggressively to get the Senate to go beyond a $350 billion tax-cut limit to come closer to the $550 billion now being sought by President Bush.

"We want to fight for as high a number as possible," Frist, R-Tenn., told reporters at the White House after he and other top GOP leaders met with Bush. He predicted the final tax cut would fall between the $350 billion Senate level and a $550 billion maximum set by the House.

While lawmakers spoke to reporters, Federal Reserve Chairman Alan Greenspan (searchtestified at the House Financial Services Committee, reiterating his opposition to substantial tax cuts that would run up a larger deficit.

The White House meeting came as Republican leaders in Congress started to explore ideas for tax cuts aimed at stimulating economic growth, searching for ways to write a less costly version of the president's plan.

Frist had taken some political heat for the Senate's decision earlier this month to accept no more than $350 billion in additional tax cuts over the next decade.

Now, Frist said, $550 billion "is a goal we'll shoot for" in the Senate. He denied that he was losing control over Republicans in the chamber which Republicans control by just a 51-49 majority.

Four Republicans have said they would block any attempt to go above the $350 billion.

Asked if he had a "Republican problem," Frist responded, "I've got a Republican challenge, and I've got a Democratic challenge." He said it was possible that Bush and his GOP allies might be able to pick up some Democratic support for going above $350 billion.

Both Frist and House Speaker Dennis Hastert, R-Ill., (searchsaid Bush emphasized in the meeting the importance of shifting attention to the economy now that major combat in the war with Iraq is over.

"Now we need to pivot" from the war to the economy, Hastert said.

Republicans are searching for ways to allow them to get above the $350 billion in additional tax cuts with offsetting revenue gains or spending cuts in other areas. They've found there won't be easy agreement there either.

The president's strongest supporters want to make room to eliminate taxes on dividends paid to shareholders. The House and Senate also have different ideas about how to treat small business tax breaks and how to find money in the budget to pass even more tax cuts.

Individual lawmakers staked out positions on what they want to see included or excluded to win their backing. And in three crucial meetings, White House officials reminded Republican leaders in Congress they expect to see most of their tax cut delivered.

"We're working on the president's package, the whole thing," Treasury Secretary John Snow said Tuesday after meeting with Frist and Senate Finance Committee Chairman Charles Grassley of Iowa (search).

Frist and Hastert met with Bush for more than an hour Tuesday evening and discussed all the top items on the president's domestic agenda: the tax cut package, AIDS spending, judicial confirmations, energy legislation and Medicare reforms, spokeswoman Claire Buchan said.

Both the House and Senate tax writing committees tentatively plan to consider the legislation next week.

One of the biggest tests facing Republicans writing the tax bill is a $400 billion proposal to eliminate taxes on dividends paid to shareholders. The proposal swamps the amount of money the Senate will devote to all tax cuts this year.

Democrats want to leave it out entirely. "If you have any significant dividends, it's going to squeeze out other provisions, which I think are more important," said Sen. Max Baucus of Montana, (search) the top Democrat on the Senate Finance Committee.

Republican aides working on the legislation suggest a less expensive option: excluding $1,500 of dividend income from taxation. Republican leaders prefer a more aggressive plan to exclude all dividends from taxation gradually by 2005. That option would consume 40 percent of the tax cut and require adjustments elsewhere.

Each member of the closely divided Senate holds a key vote, and some started to lay out their demands for the bill. Sen. Trent Lott, R-Miss., (searchsaid he will not vote for a bill that gives aid to cash-strapped states, an idea that a vast majority of the Senate endorsed last month.

Sen. Mary Landrieu, D-La., (searchwho supported the president's first round of tax cuts, says this year's bill should refund payroll taxes to win her support.

Moderate Maine Republican Susan Collins (searchsaid she wants to see more economic statistics before lending her backing to any tax cut. The other moderate Republican from Maine, Olympia Snowe, played an instrumental role in slicing in half the original $726 billion tax cut sponsored by the president.