Senate Protects Future Tax Cuts

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By the narrowest of margins, the Senate protected one of President Bush's top priorities on Wednesday by rejecting a drive by Democrats and moderate Republicans to make it tougher to approve future tax cuts (search).

The 50-50 vote -- one shy of the majority needed -- averted a major headache for congressional leaders and avoided a replay of the embarrassing setback they suffered a year ago. Then, the Republican-run Congress failed to complete a budget because the Senate approved the tax-cut limitations and the more conservative House refused to go along.

Advocates of restricting new tax reductions had hoped to gain supporters because of the government's dismal fiscal situation, which has seen two consecutive federal deficits with little relief in sight. Last year's shortfall hit $412 billion.

"They have become openly hostile to balancing the budget," one sponsor, Sen. Russell Feingold, D-Wis., said of GOP leaders. "Openly hostile to anything that gets in the way of tax cuts, regardless of what the consequences are for our budget or the economy. That's a sad moment."

But with Republicans winning four extra seats in last November's election, GOP leaders prevailed. The key was the appeal of tax cuts, which have become a paramount goal of the party in times of deficits or surpluses, recession or prosperity.

Senate Finance Committee Chairman Charles Grassley (search), R-Iowa, said the provision was "a stealth tax increase" because it would make it harder to keep Bush tax cuts enacted since 2001 from expiring.

The provision "unwisely ignores the bipartisan will to maintain current tax relief," Grassley said.

The vote was part of the Senate's work on a nearly $2.6 trillion budget for next year. The House began debate on a similar version of the plan, with each chamber hoping to finish its work by week's end.

Both budgets follow Bush's lead in cutting domestic programs and boosting defense and domestic anti-terrorism programs, while slowly reducing federal deficits.

Bush has proposed $100 billion in tax cuts over the next five years. The Senate's budget would allow $70 billion, while the House budget seeks $106 billion.

Among the expiring tax breaks Republicans would like to extend this year are levies on capital gains, corporate dividends and state and local taxes.

Congress' budget sets tax and spending targets. It leaves specific decisions about changing revenues and spending, and actual changes in law, for later legislation.

The proposal defeated Wednesday required that tax reductions or increased spending for benefit programs like Medicare (search) be paid for with spending cuts or revenue increases. The requirement could be waived if 60 of the 100 senators voted to do so, a difficult hurdle.

Republicans control the Senate by 55-44, plus a Democratic-leaning independent.