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A taxpayer's guide to the Bush tax-cut proposal

Yes, America, a tax cut probably is coming, but only after jumping more than a few hurdles

WASHINGTON (CNN) -- The first thing to remember is the road to a tax cut will be long, winding and, at times, confusing.

You can bet the White House will encounter more than one "crisis" of one kind or another. Here is a sample of three:
   Suddenly rebellious moderate Republicans demanding a smaller tax cut;
   Suddenly rebellious conservative Republicans demanding a larger tax cut;
   Conservative Democrats demanding a so-called trigger mechanism to make sure taxes are not cut so fast as to create new deficits.

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Add to this any batch of bad news on the economic front that could create a crisis atmosphere around the tax cut debate.

What is important to remember is that each "crisis" presents a political opportunity for someone. A "crisis" over more layoffs or higher energy prices could reinforce Bush's argument for a tax cut. He will argue that both create a greater need to cut taxes.

Similarly, Democrats will argue that a slowing economy means lower government revenue, raising fears that the Bush tax cut could drain even more revenue and lead the nation back down the deficit hole.

With or without these "crises," the fate of the Bush tax cut will be determined -- or more accurately, already has been determined -- by three factors: narrow Republican majorities in Congress, the slowing economy, rising surplus figures.

All three have combined to create universal bipartisan support for the largest tax cut since Ronald Reagan's in 1981. The only remaining questions are these: How big? How soon? How fast?

How big?

At one level, that depends on whether big business gets its way. The Bush tax cut is meant for individuals, not big business. This is good for ordinary taxpayers and bad for tax lobbyists and the business clients they represent.

Two large coalitions already are forming to add business-friendly tax cuts to the package. White House officials have said, "No," and that is where the matter currently sits. Business lobbyists will now work Congress even harder to stuff various breaks into the bill and dare Bush to veto it.

Senior Republican lawmakers have promised the White House they will try to keep the lid on breaks for business, but may not have the votes to stop some.

Another factor affecting the overall size will be the ability of White House operatives to prove their budget numbers add up. Conservative Democrats in the House and Senate are far less likely to follow Bush if they see detect what Bush once called "fuzzy math."

Bush may have gotten off to a good start by holding off on a big request for increased military spending. That will give him budget room now and in future years.

As one senior Bush adviser said: "When the president said he would be a different kind of Republican, he meant it. It may take time for big business and the Pentagon to figure that out."

How soon?

The calendar will unfold as follows.

The Bush budget will arrive at the end of February. Soon thereafter Bush will deliver an economic address. Both are critical to winning the inside game of credible budget numbers with Congress and the outside game of public support for a tax cut and his overall spending priorities.

If public reaction is overwhelmingly positive, opposition in Congress could wilt over time. If the public is either tepid or skeptical, Bush must rely on Congress. That will require winning the inside game with solid budget numbers.

The verdicts on both should be clear within a week of the budget submission and Bush's big speech. By then the poll numbers will be clear and Congress will have had time to digest all the Bush numbers.

The next crucial period to watch will be the end of March and early April. That is when the House and Senate will debate the Bush budget and some of the president's tax cuts. If the margins are narrow and nakedly bipartisan, they will be bad signs for Bush.

That will mean he failed the PR test with his economic address and the math test with Congress, and he will have to try and jam through his tax cut entirely on the backs of Republicans. If so, the legislation will proceed much more slowly. White House operatives will have to fight pitched and angry battles with Democrats, costing time and the good will generated in the early Bush "charm offensive."

If this occurs, the tax fight could consume all of the spring and summer, setting up final passage and a signing ceremony for sometime in August or September.

If, however, the Bush team can attract decent Democratic support -- between 40 and 60 votes in the House and eight to 10 votes in the Senate -- the tax cut is home free and speeding toward passage. Under this scenario, Bush could be signing the tax cut by early to mid-July.

How fast?

This question is crucial to the underlying economic impact of the Bush tax cut. Bush and his treasury secretary, Paul O'Neill, want Congress to make at least some of the tax cuts retroactive to January 1.

That is actually much harder than it sounds. In fact, it has never been done before.

The Internal Revenue Service would have to create a means to calculate the amount of over-taxation for each taxpayer and send out millions of refund checks.

Well, the IRS is very good at finding taxpayers who have gone missing -- meaning those who have not filed a tax return. It is not very adept at finding people on its own. That is because in the course of a year people move, change jobs, get married, or get divorced.

All of these things will affect the IRS ability to calculate and deliver a tax refund of the kind Bush and O'Neill favor. The Treasury Department is researching how to do this, and O'Neill hopes new technology might make what was once impossible, possible.

If the IRS cannot get the refund checks out, Congress may order it to change future withholding so taxpayers have less taken out of each paycheck after the tax cut is passed.

These are some of the crucial dates and decisions that will determine the fate of the Bush tax cut. Yes, America, a tax cut probably is coming. But not before all these hurdles -- and probably one or two other unexpected hurdles -- are cleared.



RELATED STORIES:
Bush sends tax-cut outline to Congress
February 8, 2001
Bush welcomes his 'tax families' to the White House
February 7, 2001
Bush launches blitz for huge tax cut
February 5, 2001
Bush describes 'cordial' visit with Democrats
February 4, 2001
Bush's to-do list: Set tone for the next four years
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