House Passes 3 Tax Cuts, Plans a 4th

Bill Thomas, left, and Roy Blunt and other House Republicans call tax cuts vital to the economy.
Bill Thomas, left, and Roy Blunt and other House Republicans call tax cuts vital to the economy. (By Melina Mara -- The Washington Post)

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By Jonathan Weisman
Washington Post Staff Writer
Thursday, December 8, 2005

The House passed three separate tax cuts yesterday and plans to approve a fourth today, trimming the federal revenue by $94.5 billion over five years -- nearly double the budget savings that Republicans muscled through the House last month.

GOP leaders portray the tax bills -- for the hurricane-ravaged Gulf Coast, affluent investors, U.S. troops serving in Iraq and taxpayers who otherwise would be hit by the alternative minimum tax -- as vital to keeping the economy rolling.

"Our economic policies have done the trick," said Rep. Deborah Pryce (R-Ohio). "We are in the middle of one of the strongest economies this country has ever seen."

But some budget analysts say the flourish of tax cutting badly undermines the recent shows of fiscal discipline. Last month's budget-cutting bill would save $50 billion over five years by imposing new fees on Medicaid recipients, trimming the food stamp rolls, squeezing student lenders and cutting federal child support enforcement.

"I don't think it makes any sense to go through all the difficulty they just went through with the budget-cutting bill, then give it all back in tax cuts," said Robert L. Bixby, executive director of the Concord Coalition, a nonpartisan budget watchdog group. "If they want to cut taxes, fine, but they are going to have to cut spending by at least that much to help the deficit, and clearly they are not willing to do that. They have to start looking reality in the face."

Under rules reserved for the least controversial bills, the House yesterday approved three tax bills in rapid succession. The first, at a cost of $31.2 billion, would slow the expansion of the alternative minimum tax, a parallel income tax system designed to prevent the rich from dodging taxation but that increasingly has affected the middle class.

The next, at a cost of $7.1 billion over five years, would provide an array of tax breaks to create President Bush's proposed Gulf Opportunity Zone in the region ravaged by hurricanes Katrina and Rita. Businesses could write off much of the cost of new structures and equipment, while the states of Louisiana, Mississippi and Alabama would be granted tax-exempt bond authority for their own rebuilding.

Bowing to pressure from Rep. Frank R. Wolf (R-Va.) and other social conservatives, GOP leaders exempted casinos, country clubs, hot tub facilities, liquor stores, massage parlors, golf courses, racetracks and tanning salons from the tax breaks, exemptions the administration initially opposed.

Finally, the House passed a modest, $153 million tax break that would extend a provision allowing members of the military to use their combat pay to claim the earned income credit.

The three measures passed overwhelmingly, with virtually all Democrats voting with Republicans, and with hardly a mention of their impact on the deficit, which is projected to reach $331 billion in fiscal 2006 and remain above $300 billion a year through the end of the decade, when most of Bush's tax cuts are set to expire. The Senate has already passed similar measures, indicating that all the measures are likely to become law.

The House voted 414 to 4 to spare 17 million individuals and families from paying the alternative minimum tax next year. Democratic Reps. Jerry F. Costello (Ill.), Collin C. Peterson (Minn.), Martin O. Sabo (Minn.) and Robert C. "Bobby" Scott (Va.) voted against the measure.

In a highly partisan atmosphere, tax cutting without regard to the growing federal debt appears to be one area that both parties can agree on, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "Everybody's losing credibility right now," she said.

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