Taxes and Tactics
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JIM LEHRER: Those conflicts and compromises over tax cuts go on and on in the Congress. Kwame Holman reports.
KWAME HOLMAN: House Ways and Means Chairman Bill Thomas succeeded in marrying that tax cutting desires of President Bush with the budgetary will of the House. Thomas yesterday took many of the provisions contained in the president’s original ten year, $726 billion tax cut proposal and fit them into the reduced tax $550 billion package that House Republicans said they could afford.
REP. BILL THOMAS: The bill today meets the objectives of the original proposal to create jobs, reduce the cost of capital, and provide immediate income tax cuts to lower income workers that are currently under current law scheduled to phase in over time.
KWAME HOLMAN: More than half the cost of the House tax plan would come from cutting the maximum tax on stock dividends from 38.5 percent to 15 percent and cutting the top tax on capital gains from 20 to 15 percent for a total cost of $277 billion; an increase in the child tax credit to $1,000; a reduction in the marriage penalty tax for married couples filing jointly, as well as lower individual income tax rates across the board, would total $234 billion. Tax cuts and incentives to increase business investment would total close to $39 billion, for an overall cost of $550 billion.
SPOKESMAN: Economists estimate that hr-2 will create over a million new jobs over one year, and this bill will pump more than $200 billion back into the economy by the end of 2004 through private sector activity.
KWAME HOLMAN: Democrats, in the minority on the committee as well as in the House, had no input in writing the tax cut bill nor any chance of slowing it down. The committee’s top Democrat Charles Rangel complained Democrats hadn’t even had time to review it.
REP. CHARLES RANGEL: I assume the Republicans are in the same position that the Democrats are, and they haven’t the slightest clue as to what you intend to do except to rearrange the chairs on the deck of the “Titanic” because unemployment is not going up nearly as fast as you like to see it.
KWAME HOLMAN: Chairman Thomas allowed each of the committee Democrats five minutes to say what they wanted about the bill. Wisconsin’s Jerry Kleczka jumped at the chance.
REP. JERRY KLECZKA: And so as I look at this package, the only thing I can conclude is we are having Christmas in May. And who is going to be the beneficiaries of the gifts underneath the Ways and Means tree? Well, it’s going to be those who have a lot of stocks and bonds and dividends.
KWAME HOLMAN: Georgia’s John Lewis aimed his skepticism at committee witness Pamela Olson, assistant treasury secretary for tax policy.
REP. JOHN LEWIS: Do you have any information, any data, that will assure us, members of this committee, that jobs will be created, and that we will see long-term economic growth?
PAMELA OLSON: I believe this to the bottom of my heart, that this is a very important corporate governance change that we need to make. I believe it’s going to unlock capital so that capital can be redeployed, and redeployed in a very positive way, that’s going to be good for the economy.
REP. JOHN LEWIS: How do you counter the arguments of people who say that this proposal is irresponsible, that it’s not fair, those that are already doing well will continue to do well, those that are at the top will continue to stay at the top, those at the bottom will continue to stay at the bottom– how do you counter that argument?
PAMELA OLSON: Well that’s not true, Mr. Lewis. There’s an expansion of the 10 percent bracket, there’s an increase in the child credit, there’s an end to the marriage penalty for lower and moderate income workers. That’s just not true.
KWAME HOLMAN: And North Dakota’s Earl Pomeroy focused on the additional money the treasury would have to borrow to pay for the tax cuts.
REP. EARL POMEROY: We’re running the government on red ink. You’re with us today. Your running the government on red ink. You are with us today significantly reduce the revenues coming to the at the present country therefore increasing the red ink. How much more are we going to have to borrow do you estimate during the period of time that this bill would be in effect?
PAMELA OLSON: I don’t have an answer to that question.
REP. EARL POMEROY: Okay, so how much we more we’re going to have to borrow depends on how much we increase the debt limit allowing you to run in red ink.
KWAME HOLMAN: It was budget chairman Jim Nussle who carved out $550 billion in the House Republicans’ budget to make room for the tax cuts. He grew tired of hearing the Democrats complain.
REP. JIM NUSSLE: The Democrats who come in here today and manufacture indignation over the concerns of debt ceilings and debt taxes and all sorts of new, very interesting and somewhat irrelevant terminology that has ever been used prior in budget debates have no proposal in the short term or the long term to recover the economy and create jobs for the American people.
KWAME HOLMAN: Democrats did attempt to tinker with the tax plan. California’s Pete Stark proposed delaying the dividend and capital gains rate reduction until surpluses once again return. Maryland’s Ben Cardin pressed for an extension of federal unemployment benefits. And Washington’s Jim McDermott called for workers to get a holiday from paying payroll taxes on the first $20,000 of income.
SPOKESMAN: All those in favor say “aye.” Those opposed?
KWAME HOLMAN: But none of the amendments proposed by Democrats attracted any Republican support.
SPOKESMNAN: There being 15 “ayes” and 23 “no’s,” the amendment is not agreed to.
KWAME HOLMAN: The full House is expected to vote on and approve the Republican-backed tax cut plan on Friday. Now the focus turns to the Senate. Its Finance Committee meets tomorrow to try to pass what chairman Chuck Grassley hopes will be a bipartisan tax cut bill. But so far, Grassley’s plan for a smaller tax package with a scaled down dividend tax cut has not won the crucial support of fellow committee Republican, Olympia Snowe of Maine.