Republicans in Congress cut a deal yesterday to give President Bush at least $1.35 trillion in tax cuts – and GOP sources predicted they’ll ultimately push the total cut closer to the $1.6 trillion he wants.
“This is a great day for the American people,” said Bush, who hailed it as “the most tax relief in a generation” – since Ronald Reagan.
It marks a big win for Bush on his 102nd day in office, but he went out of his way to present it as a bipartisan effort by Republicans and Democrats “working together” rather than in us-vs.-them terms.
The deal, crafted by Republican leaders to win over moderates in both parties, includes $100 billion in quick cuts to rev up the flat economy, most likely by refund checks or lower withholding taxes.
Democratic moderate leader Sen. John Breaux of Louisiana endorsed the plan and predicted enough moderates will back it to pass easily, although Senate Minority Leader Tom Daschle (D-S.D.) said he’s still against it.
The fact that moderate Democrats now appear to be breaking with their leadership on taxes represents a triumph for Bush’s efforts to woo them – and a problem for Democratic leaders.
The deal is just a framework to lock in a minimum dollar figure for tax cuts by including it in the budget. Next week lawmakers will start hammering out what taxes to cut.
A Republican leadership aide said the total tax cut is likely to get bigger because Bush’s popular proposal to trim the marriage penalty may – and likely will – be taken out and passed separately.
“It’s very popular, a lot of Democrats vote for it and there’s no reason it can’t get passed on its own – we’re making no commitment that $1.35 trillion is all we’re going to do this year,” the GOP aide said.
If the marriage penalty is separate, the $1.35 trillion can go to cutting all tax rates, doubling the per-child tax credit from $500 to $1,000 and reducing if not eliminating the “death” (estate) tax.
Republican sources predicted the cut in all tax rates will be more “aggressive” than in Bush’s original plan, with retroactive cuts to the start of this year, particularly for those at the lowest income levels.
There also may be a new push to cut the capital gains tax, particularly if the economy stays sluggish, GOP strategists said.
Also to be worked out is how to allocate the $100 billion in tax cuts for 2001 and 2002, but Treasury Secretary Paul O’Neill said this week he’s already given the go-ahead to buy paper for possible refund checks.
GOP leaders hope to pass the budget this week to lock in the overall tax-cut figure, and then pass the specific cuts by Memorial Day.
Bush had to settle for $1.35 trillion for now because two moderate Senate Republicans – Jim Jeffords of Vermont and Lincoln Chafee of Rhode Island – refused to agree to more, so he lacked the votes in a Senate split 50-50.
The budget would also cap Uncle Sam’s spending hikes for next year at 5.2 percent – more than the 4 percent Bush wanted, but less than the 8 percent passed by the Senate previously, sources said.