Bush treasury chief argues for tax relief now
WASHINGTON (CNN) -- Treasury Secretary Paul O'Neill told a House panel Tuesday "the time to act is now" on a tax cut, opening the lengthy process that will likely lead to debate of a sprawling tax bill in Congress.
O'Neill, acting as President Bush's point man on tax relief, approached the tax-drafting House Ways and Means Committee on Tuesday to argue in favor of Bush's proposed tax cuts.
His appearance allowed members of the influential committee to quiz the administration on Bush's proposal to wean the federal government off $1.6 trillion in income tax receipts over the next decade.
At the same time, committee staff members worked behind the scenes to turn Bush's tax blueprint -- sent to Capitol Hill last week -- into legislative language.
"Our intention," O'Neill said in his opening remarks, "is to give people, however you might stylize it, a tax cut or a pay raise."
The president's plan closely mirrors the proposals he made the centerpiece of his campaign for the White House. It includes a reduction in income tax rates, an easing of the so-called "marriage penalty" that causes married couples to pay more in taxes than if they were single, a gradual elimination of the estate tax, and a boost in tax breaks for charitable contributions.
The Bush framework would cut the lowest income tax rate to 10 percent and the highest to 33 percent. It also would change the five-rate income tax structure -- now 15 percent, 28 percent, 31 percent, 36 percent and 39.6 percent -- to four rates: 10 percent, 15 percent, 25 percent and 33 percent.
Administration operatives have been keen to illustrate how proposed changes would affect four-person families -- a mean configuration, they argue -- earning between $35,000 and $50,000 annually.
Four-person families earning $35,000, O'Neill argued Tuesday, would under many circumstances see their tax obligations eliminated. A four-person, $40,000-per-year family could earn back $1,600, the administration has said, and a $50,000-per-year family could see its federal income tax cut in half, from an average of $4,000 to $2,000.
"We believe the time to act is now," O'Neill said. "Our economy has slowed down in the last six months beginning in August, and we are now bouncing around by some estimates in a narrow range of economic activity amounting to [between] 5 percent growth and minus 5 percent growth."
O'Neill also confirmed that the administration's plan is indeed predicated on federal projections of a $5.6 trillion budget surplus accumulated by 2011.
Such a surplus should not be allowed to sit in federal coffers, O'Neill said, not only because conservative principles dictate that taxpayers should get their money back, but also because it is unwise to allow the federal government to convert billions of dollars into assets once the debt is paid down.
"It is important to change the tax structure so we don't accumulate a large amount of assets on the federal level," O'Neill said.
The committee's majority Republicans praised Bush and O'Neill for a package they have argued is long overdue. Democrats insisted, however, that the administration was putting the cart before the horse by submitting a tax relief plan to Congress without first drafting a fiscal year 2002 budget.
"We can only support a tax cut when we know what is going to happen with the rest of the budget," said Rep. Charles Rangel, D-New York, the ranking Democrat on Ways and Means. He added that the solvency of Social Security and Medicare was a hugely important issue that would also have to be tackled this legislative year.
"We will have a budget in two weeks," O'Neill pledged. "I don't want to tell you exactly what the budget is yet -- that's the president's business. But there is plenty of room to protect Social Security, but also to implement what the president has proposed for tax changes.
"Arguably, we could have $1.5 trillion [of the budget surplus] left over for other priorities," O'Neill said.
Pressed further by Democrats on the health of the Social Security program, O'Neill insisted he would return to the committee to outline proposals now under consideration by an administration task force consisting of himself, Vice President Dick Cheney, and members of the White House budget office.
"I wish you'd come up with Social Security before you come up with the tax bill, because I think the tax bill is going to jeopardize Social Security," said Rep. Robert Matsui, D-California.
"I'll be back," O'Neill replied.
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