Lawmakers wrestle with competing tax-cut plans
Daschle unveils proposal for Senate Democrats
WASHINGTON (CNN) -- With President Bush exhorting lawmakers to support his economic plan, Senate Democrats on Tuesday unveiled a rival measure, one that would offer tax credits to families and businesses, aid to states, but without a key provision sought by the White House: the elimination of taxes on dividends.
The Democratic plan, presented by Senate Minority Leader Tom Daschle at a news conference, has an estimated 10-year price tag of about $152 billion -- far less than the $726 billion originally sought by Bush. Daschle called it "fair, fast-acting and fiscally responsible," and said a family of four earning about $50,000 a year would see federal taxes reduced by an average of $1,630 this year.
With Republicans controlling both the Senate and the House, the "Jobs, Opportunity and Prosperity" plan outlined by Daschle is not expected to win enough votes for passage, but it serves as a marker of sorts for Democrats who want to make the economy a key issue in the 2004 presidential race.
It's not just Democrats who are resisting the Bush plan. Some moderate Republicans have raised objections to the size and scope of the Bush plan, particularly the centerpiece idea to eliminate taxes on dividends.
They've pointed to the cost of the war and reconstruction in Iraq, and growing federal deficits as reasons why Bush's proposal should be scaled back.
There are several plans under consideration on Capitol Hill, and there is some overlap among them. Democrats and Republicans each claim their proposals will generate about 1 million jobs by the end of 2004 -- a presidential election year.
Sen. Chuck Grassley of Iowa, chairman of the Senate Finance Committee, promised a "very aggressive dividend part" to tax-cut legislation Senate Republicans have drafted, but the dividend provision is for three years only.
Sen. Olympia Snowe, a moderate Republican from Maine, dismissed the idea as a gimmick to hide the deficit. She said Republicans need to balance their calls for tax cuts with their historic support for balanced budgets. The 2004 budget Bush sent to Capitol Hill projects a record $304 billion deficit.
"If you asked the American people how best to address our nation's economy, overwhelmingly people will say we have to cut deficits," she told CNN.
Bush blames the shortfall on the wars in Afghanistan and Iraq, the 2001 recession and the September 11, 2001 terrorist attacks. He argues his tax cut will boost the economy, resulting in more revenue.
Daschle, D-South Dakota, said Bush's proposal would increase the federal budget deficit "dramatically" and result in higher interest rates -- which he called "the hidden tax in their tax cut."
New 'wage credit'
The plan unveiled by Daschle would do nothing to reduce the taxes on dividends. It includes a new "wage credit" of $300 for every working American, plus another $300 each for the first two children. The plan would also accelerate the child tax credit and the doubling of the standard deduction for married couples.
The plan includes a variety of incentives and tax credits for businesses to invest in new equipment and help employees with their health care costs. It also includes about $40 billion in direct aid to states.
"What we're offering is real jobs, real opportunity and real prosperity -- a plan that works for our country," Daschle said.
Earlier, Bush appeared before the U.S. Chamber of Commerce and delivered his second sales pitch in as many days for his economic plan. He saluted "some progress" in Congress on the dividend aspect of his plan, but he pushed lawmakers to pass deeper cuts.
"We need aggressive action out of the United States Congress now," Bush said. The president said that under his plan a family of four making $40,000 a year would see their federal taxes reduced from $1,178 to $45 a year. As he did Monday, Bush urged supporters to call members of Congress and urge action on tax cuts.
With the tax debate heating up, Mitch Daniels, Bush's budget director, informed the White House on Tuesday that he would resign his post in 30 days. The White House said that Daniels wanted to spend more time with his family. Administration sources said Daniels is considering a gubernatorial run in Indiana.
--Written by CNN.Com Producer Sean Loughlin with reports from CNN Congressional Correspondent Jonathan Karl and Capitol Hill Producers Ted Barrett, Steve Turnham and Trish Turner.