President Bush sent his $1.6 billion tax cut plan to Congress today, where both larger and smaller proposals are brewing.
KWAME HOLMAN: Throughout his presidential campaign, candidate George W. Bush promised, if elected, he'd send to Congress a proposal for large across-the- board tax cuts. Today, at the first White House Rose Garden ceremony of his administration, President Bush kept his promise.
PRESIDENT GEORGE W. BUSH: Today I am sending to Congress my plan to provide relief to all income taxpayers, which I believe will help jumpstart the American economy. We must give overcharged taxpayers some of their own money back.
KWAME HOLMAN: Currently, there are five income tax brackets set for individuals and married couples. Income in those brackets is taxed at rates ranging from 15% to a top tax rate of 39.6%. President Bush's plan would shrink the number of brackets to four and reduce the rate for each bracket as well. The top rate would fall to 33%. Rates in the remaining brackets would decrease to 25%, 15%, and 10%.
PRESIDENT GEORGE W. BUSH: Families with children will also receive a tax credit of $1,000 per child. We will end the death tax, reduce the marriage penalty, and expand tax incentives for charitable giving.
KWAME HOLMAN: The President's plan to cut taxes recently got back-to-back boosts. Two weeks ago, Federal Reserve Chairman Alan Greenspan said tax cuts at this time of budget surplus were preferable to more government spending. And just last week, the Congressional Budget Office doubled its 10-year budget surplus estimate to $2.7 trillion; much more than the President's $1.6 trillion tax cut.
PRESIDENT GEORGE W. BUSH: Our Treasury is full and our people are overcharged. Returning some of their money is right, and it is urgent.
KWAME HOLMAN: There is a determined group of Republicans in the House who wants to push the 10-year cost of tax cuts higher to $2 trillion. But yesterday, the President cautioned against it.
REPORTER: Are the tax cuts the right size?
PRESIDENT GEORGE W. BUSH: I believe it's the right size, and I think it's going to be very important for us and the members of Congress to work together, but I'm going to make my case that the size of the tax relief package I propose is... is right.
KWAME HOLMAN: In fact, every day this week the White House put on events designed to allow the President to expound on the benefits of his broad-based tax cut plan.
PRESIDENT GEORGE W. BUSH: It helps people get out from underneath their own personal debt load and that's important.
KWAME HOLMAN: And all week long, North Dakota Senator Kent Conrad has tried to keep pace with the President.
SEN. KENT CONRAD: When we look at President Bush's tax cut plan, we see, number one, that it is too big, that it uses virtually all of the non-trust fund surpluses that is, once you get past the Social Security and the Medicare and the other trust funds, his tax cut uses up all the rest of the money. That runs the risk of putting us back into the deficit ditch that we've just climbed out of.
KWAME HOLMAN: Conrad is the senior Democrat on the Senate Budget Committee as well a member of the tax-writing finance committee. His message is that the Bush plan is too much too soon. Conrad raised the red flag two weeks ago on the day Federal Reserve Chairman Greenspan first endorsed the idea of a tax cut.
SEN. KENT CONRAD: We're not saying here, "open the floodgates." We can just cut taxes willy-nilly and we can engage in whole new spending initiatives; that we have to maintain a fiscal discipline, that there is room for significant tax relief here, but that we also have to be mindful of these long-term fiscal demands of an aging population-- the baby-boom generation.
ALAN GREENSPAN: Absolutely, Senator. If we had a budgetary process in which what we were dealing with were one-year bills, one- year taxes and no implicit commitments beyond that point, then forecasting would not be a readily important issue.
KWAME HOLMAN: And Conrad raised another flag when he questioned that prediction of higher budget surpluses made by the Congressional Budget Office.
SEN. KENT CONRAD: So, based on CBO's previous forecasting differences, the difference between what actually occurred and what was forecast, we could see, in the year 2006, conceivably a deficit based on the differences we've seen in past forecasts from what actually occurred, or we could see in that year as much as a trillion-dollar surplus. Is that correct?
SPOKESMAN: Both of those possibilities are possible, yes.
SEN. KENT CONRAD: I just want to urge people that is the uncertainty in this forecast.
KWAME HOLMAN: However, Conrad acknowledges that this year the momentum on Capitol Hill is squarely behind a big tax cut.
KWAME HOLMAN: Do you sense that your constituents really want a tax cut this time?
SEN. KENT CONRAD: Oh, yes. I think people would like a tax cut. I'd like to see us enact a tax cut. I've proposed one. I think it's significant, but I also think it's part of a balanced plan.
KWAME HOLMAN: But it's the President's plan that will frame the tax cut debate in Congress. Late this morning on Capitol Hill, Treasury Secretary Paul O'Neill ceremonially delivered copies of it to Republican leaders. Congress is expected to work well into the spring hammering out the details.