Democratic Leadership Attacks Moderate Dems, GOP Over Tax Compromise

Senior Democrats attacked a proposed Senate compromise on tax cuts Tuesday as too costly, tilted toward the wealthy and an unwise move in increasingly uncertain economic times.

"This bill flunks every test," said Sen. Kent Conrad, D-N.D., as the Senate Finance Committee opened debate on the 11-year, $1.35 trillion tax relief package.

Senate Minority Leader Tom Daschle, D-S.D., said the bill would cost as much as $4 trillion in the decade after it is fully in effect, jeopardizing Medicare and Social Security just as the baby boom generation begins retiring. One-third of the tax cuts, he added, would benefit just 1 percent of taxpayers.

"I find it very difficult to accept and about impossible to explain," Daschle said.

But Republicans, backed by moderate Democrats such as Sen. John Breaux of Louisiana, defended the plan as a measured refund of some of the government's huge projected budget surpluses. They said because half of taxpayers are responsible for 96 percent of income taxes, the wealthy benefit more by definition.

"There's one form of bigotry that is still acceptable in America -- that's the bigotry against the successful," said Sen. Phil Gramm, R-Texas.

The bill would cut income taxes across the board, creating a new 10 percent rate for a portion of every taxpayer's income, retroactive to Jan. 1. Among other things, the measure would gradually repeal the estate tax, ease the marriage penalty paid by millions of two-income couples, double the $500 child credit and expand tax-favored contribution limits for IRAs and 401(k)s.

Finance Committee members proposed 171 amendments, many of which will be taken up beginning later in the day.

The measure could reach the Senate floor as early as this week. Republican leaders hope to quickly resolve differences with the House and get the bill to the president's desk before Memorial Day.

GOP conservatives, including Majority Leader Trent Lott, want the top 39.6 percent income tax rate dropped to 33 percent, as sought by President Bush, instead of settling for the 36 percent in the bill. They also say the gradual phase-in of most of the rate cuts over seven years is too slow.

"I think that nobody should pay over a third of their income for federal taxes," Lott, R-Miss., told reporters Monday. "I hope that will be the eventual result."

Many conservatives also oppose a part of the bill, suggested by moderate GOP Sen. Olympia Snowe of Maine, to permit low-income workers to claim a portion of the child credit even if they don't pay any income taxes.

Lott said he is "worried about it being turned into a redistribution of wealth, or a welfare program, when it's supposed to be helping people that are paying too high in rates."

Democrats, on the other hand, say the package remains nearly as tilted toward the wealthy as Bush's original 10-year, $1.6 trillion tax cut. A series of amendments they plan to offer would attempt to change that distribution, many by scrapping the plan to repeal estate taxes and using the money in other ways.

An analysis by the labor-funded Citizens for Tax Justice shows that the top 1 percent of taxpayers -- those earning over $373,000 a year -- would get 33.5 percent of the benefits of the bill, an average of over $44,000 each. People earning under $44,000, meanwhile, would get 15.3 percent.

Democrats also want to add tax breaks for corporate research and development; include greater protections for middle-class taxpayers from the complex alternative minimum tax; and make reduction of the top income tax rate contingent on passage of a Medicare prescription drug benefit.

Another issue to be sorted out involves how to deliver $100 billion in economic stimulus this year and next. The White House is lobbying for refund checks to taxpayers, but the bill would call for the Treasury Department to change paycheck withholding levels to provide $300 for individuals and $600 for married couples.

Yet another group of senators is pushing a "trigger" that would only permit the tax cuts to proceed if projected budget surpluses actually materialize.

Many senators say the proposed bill postpones the full impact of many tax cuts too far into the future. Fixing the marriage penalty, for instance, wouldn't begin for five years and would take until 2010.

The legislation also would delay the impact of provisions that affect people who hope to grow tax-deferred savings for retirement; families who want to claim promised $1,000 child credits; and individuals who want to leave large estates to their heirs.