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Senate conservatives vow to pursue deeper dividends tax cutBush calls for 'bold' action from Congress
From Steve Turnham and Trish Turner
WASHINGTON (CNN) -- Senate conservatives vowed Thursday to beef up a compromise $430 billion tax-cut package and fold in more of the White House plan to eliminate federal taxes on dividends. As the Senate Finance Committee began its work on the legislation, President Bush kept up the pressure for deeper cuts -- a goal that has run into opposition from some members of his own party who have raised concerns about growing federal deficits. "The question is will the Congress respond in a bold enough way to help people who are looking for work find a job," Bush told reporters. "That is the fundamental question that Congress ought to ask." At the other end of Pennsylvania Avenue, it was clear the tax package in the Senate was a work in progress. While moderates applauded the compromise deal announced Wednesday night, several conservative senators said the package fell short. "We didn't do enough in my opinion to eliminate the double taxation on dividends," said Sen. Don Nickles, chairman of the Senate Budget Committee. The Oklahoma Republican called the dividend provision "unacceptable." In order to win the support of Sen. Olympia Snowe -- a moderate Republican from Maine whose vote is needed to get the bill through the committee -- Sen. Chuck Grassley, chairman of the panel, and the GOP leadership abandoned a plan to completely eliminate the double taxation of dividends. Instead, the compromise package would exempt the first $500 in dividend income from taxation, then cut the tax rate on any additional dividend income by 10 percent for the first five years and 20 percent for the next five. Many of the most popular provisions remained in the bill, including acceleration of the 2001 tax break, the marriage penalty relief and child tax credits.
One crucial element that helped garner Snowe's support was the addition of state aid. Committee Republicans agreed to send $20 billion in aid to financially strapped states. The No. 3 Republican in the Senate, Rick Santorum of Pennsylvania, promised to "beef up" the dividend cut when the bill gets out of committee. Sen. Trent Lott, R-Mississippi, said the package is nearly worthless. "I'm not happy with it at all, I think it is of very marginal value," said Lott. "It has almost nothing in terms of dividends." Lott said he far preferred the House version of the tax cut, which cuts taxes on dividends and capital gains tax down to 15 percent. Lott said he hoped to incorporate some of the House ideas later on the Senate floor or in conference committee when the final Senate and House bills are reconciled. But Snowe said the compromise amounted to significant tax cuts and cautioned her colleagues against pursuing anything deeper. "We're facing deficits as far as the eye can see," she said. Snowe, along with Sen. George Voinovich of Ohio, forced Senate Republicans to scale back the president's original tax plan by insisting that the complete package be no more that $350 billion. Closing corporate loopholesDespite the higher price tag of the new plan, Snowe said she believed it was "a fiscally responsible approach." Voinovich called it "a robust tax cut that gives the economy a needed shot in the arm without shooting the deficit in the foot." Both have said they would only accept a plan of more than $350 billion if the extra money can be found by closing corporate loopholes and other so-called "offsets." Just how much offset money is available is a matter of dispute.
Before striking the deal Wednesday night, Grassley said the most he could find in legitimate offsets was about $50 billion. Asked earlier this week how much offset money Snowe believes is actually out there, a top aide cited reports from other committees claiming that between $35 billion and $53 billion dollars can be recovered by closing corporate loopholes. The plan before the committee contains $85 billion in offsets. Sen. John Breaux, a moderate Democrat from Louisiana, suggested at least some of it was gimmickry. "Tax cuts are fun to do. It's great to cut taxes, but it's not free," said Sen. John Breaux, D-Louisiana. "We've got to find a way to pay for them. The offsets that we have in this bill have already been used...I mean these offsets are as rare as a fat chicken running around Baghdad." Meanwhile, on the House side, Republicans have agreed on a $550 billion tax cut plan and are expected to approve it Friday. Wednesday, House Democrats unveiled a plan that they will offer as an alternative to the House Republican bill. Democrats say their proposal will add more than a million jobs to the economy in 2003 by pumping $129 billion into the economy over the next two years.
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Tax cuts are fun to do. It's great to cut taxes, but it's not free. We've got to find a way to pay for them.
