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  • Full Coverage: The Tax Bill

  • Senate GOP Tax Bill May Lead to Deal

    By Eric Pianin and Helen Dewar
    Washington Post Staff Writers
    Wednesday, July 28, 1999; Page A1

    UPDATE
    Senate Rejects Democratic Tax Plan
    Updated 7:50 a.m. EST

    WASHINGTON (AP) The Republican-controlled Senate rejected a Democratic call for scaled-down tax cuts Wednesday and pushed a larger, $792 billion measure toward passage despite a fresh word of caution from Federal Reserve Chairman Alan Greenspan and a veto threat from the White House.

    The vote was 60-39 against a Democratic proposal for cuts of $290 billion over 10 years, an amount that supporters said would leave enough money to safeguard Social Security, Medicare and other domestic priorities.

    The vote was the first of substance on the tax issue, which is expected to come to a final Senate vote by Friday. And it underscored the Republican command of the Senate floor on the issue, despite a largely symbolic retreat earlier in the day in which the GOP was forced to agree to make any tax cuts expire in 2009.

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    Despite renewed White House opposition yesterday, the Senate appears poised to approve a giant $792 billion tax cut bill that contains features of what could be an ultimate bipartisan compromise on the contentious issue.

    President Clinton and Vice President Gore mounted coordinated attacks on GOP tax cutting, charging that it was premised on phony budget assumptions and could undermine efforts to bolster Medicare and Social Security. Yet as the Senate begins its formal debate today, there is at least a thin veneer of bipartisanship that was missing from last week's divisive House debate.

    Although most Democrats still think the tax bill is far too big, a few, including Sen. Bob Kerrey (Neb.) and John B. Breaux (La.), may support it to gain leverage in the negotiations over a final deal. And the Senate's chief tax writer, Finance Committee Chairman William V. Roth Jr. (R-Del.), has gone out of his way to try to craft a bipartisan plan.

    Although he was an apostle of Reagan-era tax slashing, Roth resisted pressure from Senate Majority Leader Trent Lott (R-Miss.) and other conservatives to include an across-the-board tax cut and a sharp reduction in the capital gains tax key features of the House GOP plan.

    Instead, Roth has designed a bill more appealing to Democrats by focusing more of the benefits on middle- and lower-income families. His bill would reduce the tax rate on the bottom bracket from 15 percent to 14 percent and increase the number of Americans who would pay the lowest rate. It also would provide extensive breaks and credits to defray education and health care costs and to encourage long-term savings and investment.

    Roth said his approach would be better than the House plan in helping families cope with the most difficult challenges they face, including educating their children and caring for the elderly. Moreover, he said, corporations and wealthier individuals reaped the benefits of a cut in the capital gains tax two years ago, as part of a major budget deal, and there are more pressing priorities to fund.

    "Basically he put together a more possible bill that was more middle-of-the-road and more balanced," said Sen. Max Baucus (Mont.), a senior Finance Committee Democrat.

    Even so, a Treasury Department analysis of Roth's plan concludes that 67 percent of the tax breaks would go to the wealthiest 20 percent of American families those making above $81,967 a year while the poorest 60 percent of families would reap only 12 percent of the breaks.

    In contrast to last week's House debate, which was marked by bitter partisanship and a nearly successful revolt by moderate Republicans, the Senate deliberations likely will be a largely scripted event with both parties intent on offering numerous amendments but neither capable of altering the underlying bill.

    Lott said yesterday that it's unlikely conservatives could muster the votes to insist upon the 10 percent across-the-board tax cut or the reduction in the capital gains tax, while moderate Republicans and fiscal conservatives promoting a smaller, $500 billion tax cut conceded they have minimal support. "We'll give it a go, but I'm clearly recognizing that it's a tough row to hoe here," said Sen. John H. Chafee (R-R.I.), a sponsor of the $500 billion plan.

    As Senate GOP and Democratic leaders prepared for what is likely to be two to three days of debate and votes, Clinton and Gore continued their campaign to portray the GOP tax cut proposals as excessive and potentially dangerous to continued economic prosperity.

    In a White House appearance with first lady Hillary Rodham Clinton, the president again argued that the Republican tax cut plans would not leave enough revenue for needed investments in defense, education and major entitlement programs such as Social Security and Medicare.

    "Last week, in the House of Representatives, they passed an irresponsible tax bill that would spend our surplus," the president said at an event highlighting women's dependence on Medicare. "It wouldn't devote a dime . . . to extending the solvency of Medicare."

    Citing GOP use of "emergency" budget measures to sidestep spending limits, Clinton said Congress "has begun resorting now to accounting gimmicks, because they've approved such a big tax cut they can't meet the fundamental obligations of government without beginning, right now, to spend the surplus."

    Gore joined Senate Minority Leader Thomas A. Daschle (D-S.D.) and House Minority Leader Richard A. Gephardt (D-Mo.) at a rally at the Capitol to denounce the Republicans' tax cut plans as a sop to special interests that would consume surplus funds that could otherwise go for Medicare reform, including the creation of a prescription drug benefit.

    "So tell me again what is the purpose of blowing the surplus on a huge gigantic risky tax scheme?" Gore said.

    Senate and House GOP leaders said the White House was engaging in scare tactics because it objects to allowing average Americans to share in the huge anticipated future surpluses in the form of tax cuts. "President Clinton and his Democrat allies don't trust the American people to spend their money wisely," said House Republican Conference Chairman J.C. Watts (R-Okla.).

    House Majority Leader Richard K. Armey (R-Tex.) also rebutted Democratic claims of budget gimmickry, saying that in the end the GOP would not tap surpluses generated by the Social Security program to pay for tax cuts. Both parties have promised to save that money for bolstering the finances of the retirement program.

    The Republican goal is to work out a compromise of the House and Senate tax bills before the August recess, so lawmakers can go home with a unified message. It's unlikely Congress will send a bill to the president this summer and give him the opportunity to veto it.

    Instead, the issue is likely to linger until fall, when some lawmakers say Congress may move closer to the plan generated by Roth, 78, a moderate who has served in the Senate for nearly three decades. Roth blazed the tax-cutting trails in the late 1970s, when he and then-Rep. Jack Kemp (R-N.Y.) devised a three-year, 30 percent, across-the-board income tax cut that became the model for President Ronald Reagan's 1981 tax cut.

    Roth decided early this year that the best way to get his tax bill passed was to fashion a bill that would have at least some bipartisan appeal. Unlike House Ways and Means Committee Chairman Bill Archer (R-Tex.), who shut out Democrats in devising his version of the bill, Roth reached out to Finance Committee Democrats as he shaped his bill.

    "I always try to have the committee working in a [bipartisan] spirit," Roth said yesterday. "I think that's the way you get things done."

    Staff writer Charles Babington contributed to this report.


    © 1999 The Washington Post Company

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