Senate Finance Committee Approves Bipartisan Tax Cut Bill
WASHINGTON – The Senate Finance Committee voted Tuesday to approve a bipartisan tax cut package after supporters fought off amendments pushed by outnumbered Democrats to increase the benefits for lower-income people.
The 14-6 vote cleared the way for the 11-year, $1.35 trillion bill to reach the Senate floor, with debate to begin Thursday and final votes on Monday. Republican leaders hope to reach a rapid final tax cut deal with the House and get the bill to President Bush by Memorial Day.
"We hope to move the bill very quickly through the Senate," said Sen. Charles Grassley, R-Iowa, the committee chairman.
Grassley and the panel's other nine Republicans were joined in opposing many amendments and on the final vote by four of the 10 Democrats: Sens. Max Baucus of Montana, John Breaux of Louisiana, Robert Torricelli of New Jersey and Blanche Lincoln of Arkansas.
"This is a starting point, not the final," Breaux said. "We are a long ways from getting a final product."
The bill, which contains the core of Bush's original tax cut plan, would slash income taxes across the board, creating a new 10 percent rate for a portion of every taxpayer's income, retroactive to Jan. 1, as an economic stimulus. The top 39.6 percent income tax rate would drop to 36 percent and most other rates would fall by three percentage points by 2007.
Among other things, the measure would also gradually repeal the estate tax, ease the marriage penalty paid by millions of two-income couples by 2010, gradually double the $500 child credit and expand tax-favored contribution limits for IRAs and 401(k)s.
The Finance Committee on Tuesday defeated Democratic amendments intended to boost the immediate economic stimulus, reduce the 15 percent rate to 14 percent, accelerate the pace of marriage penalty relief and delay cuts in the top 39.6 percent tax rate until Congress had passed a universal prescription drug benefit under Medicare.
Some Democrats, including Minority Leader Tom Daschle of South Dakota, were sharply critical of the legislation as tilted toward the wealthy, too costly and unwise given the uncertainty of long-term budget projections.
Daschle 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.
"This bill flunks every test," said Sen. Kent Conrad, D-N.D.
One change that was agreed to would delay $23 billion in corporate tax payments until next fiscal year to ensure that no Social Security or Medicare money was needed to help pay for the tax cut.
Democratic supporters said the bill was an improvement over Bush's 10-year, $1.6 trillion plan, which would cut the top income tax rate to 33 percent instead of 36 percent. Congress, they said, could change course in the future if projected surpluses don't materialize.
"It is better legislation because it was reduced in scale," Torricelli said. "It was made better and more fair. It is affordable and balanced."
Republicans grumbled that many of the tax cuts would take too long to take effect and objected to provisions that would allow millions of low-income people to claim part of the child credit even if they owe no income tax. But they generally refrained from trying to make any changes, waiting instead for the Senate floor or a House-Senate conference that will determine the contours of the final bill.
Sen. Phil Gramm, R-Texas, said he wanted deeper income tax rate cuts but would wait until that conference "and pray that somehow our prayers will be heard."
The House has already passed the bulk of the tax cuts in much the same form as Bush proposed, but planned to pass another version Wednesday that fits within the $1.35 trillion limit set by the congressional budget.
One change that was made Tuesday by the Finance Committee, required by budget rules, would end the tax cuts at the close of the 11-year period on Sept. 30, 2011. That means a future Congress would have to decide whether to extend them or make them permanent.
Meanwhile, the House voted 420-0 to pass legislation that would expand tax breaks for families taking foster children into their homes.
The bill, costing $586 million over 10 years, would allow families to exclude from their taxable income payments received for the care of foster children, even when those payments are made by private or for-profit agencies. Under current law passed in 1986, exemptions are allowed only for payments from state organizations or other tax-exempt groups.