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Tax Cut Compromise Collapses in Senate

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  • Full Coverage: The Tax Bill
  • By Eric Pianin and Helen Dewar
    Washington Post Staff Writers
    Friday, July 30, 1999; Page A4

    Support for a middle-ground bipartisan tax cut plan collapsed in the Senate yesterday as party positions began to harden and lawmakers and administration officials expressed skepticism that a compromise can be reached this fall.

    Senate Republicans are pressing for passage of a $792 billion tax cut plan comparable in cost to a House-passed package while President Clinton and most Democrats are insisting on a much smaller, $290 billion plan that would leave more of projected budget surpluses for Medicare reforms and other domestic spending.

    A coalition of about 10 moderate Republicans and centrist Democrats sought to bridge the gap this week with a $500 billion split-the-difference alternative they planned to bring to a vote. But proponents including Sens. John Chafee (R-R.I.) and John Breaux (D-La.) pulled back and canceled the vote yesterday afternoon after Democratic support began to wilt under pressure from the White House and Senate Minority Leader Thomas A. Daschle (D-S.D.).

    "It's not going to pass and we're better off just having the plan out there, talking about it," said Sen. Bob Kerrey (D-Neb.), one of the chief authors of the moderate plan. "I don't think we should force the issue, with a hardening of the positions on both sides."

    The demise of the moderate plan highlights how difficult it will be for the two sides to come to some kind of agreement on taxes and spending this year. With huge budget surpluses expected over the next decade, many in Washington have speculated that the administration and GOP leaders could come to a grand compromise this fall with a modest tax cut and reform of Medicare and Social Security.

    But just in the last week, Clinton has stepped up his criticism of the GOP tax plan, congressional Democratic leaders toughened their stand in favor of much smaller tax cuts, and Republicans have begun to express doubt that a compromise is desirable or possible because of the concessions they would have to make.

    "The price is too high to pay for a tax cut," said Sen. Connie Mack (R-Fla.), a conservative with a long record of favoring big tax cuts. "We would be giving up too much. I'd rather wait and fight it out over spending."

    A senior Senate GOP aide said that the moderates' unexpected decision to pull back "proves once again that there's no third way."

    But members of the moderate group insisted they would be vindicated and that the warring sides would gradually move toward a compromise along the lines of their $500 billion tax plan. "We may spend July and August debating our partisan proposals," said Sen. Robert G. Torricelli (D-N.J.). "But by the time we reach October it is a plan like this that will bring us together."

    The collapse of the moderate plan came on the second day of the Senate debate on taxes. The Republican proposal to cut taxes $792 billion over the next decade stayed on course for final passage today, as the Senate beat back repeated efforts to alter the plan from both left and right.

    A more conservative tax-cutting plan, sponsored by Sen. Phil Gramm (R-Tex.), was rejected, 46 to 54, although it had the support of Majority Leader Trent Lott (R-Miss.) and other top GOP leaders. The proposal would have brought the Senate bill more in line with the House-passed bill by cutting income tax rates by 10 percent across the board, repealing estate taxes and cutting capital gains taxes.

    Instead of an across-the-board income tax rate cut, the main Senate tax plan would reduce the lowest rate, from 15 percent to 14 percent, and increase the number of moderate income Americans paying the lowest rate. The plan would reduce, but not repeal, the estate tax while doing nothing to lower the capital gains tax. These are likely to be among the most important differences to work out when House and Senate negotiators begin ironing out a compromise plan, possibly this weekend.

    The Senate also voted 55 to 44 to reject a proposal by Sen. Edward M. Kennedy (D-Mass.) to add funds to provide prescription drugs for Medicare recipients, while turning down rival GOP and Democratic plans to lock away much of the surplus for Social Security and, in the case of the Democrats, for Medicare.

    On the competing "lock box" proposals, the Democratic plan to shield Social Security surpluses as well as $300 billion for Medicare was rejected, 58 to 42. The vote on the Republican proposal, which would have walled off the Social Security surplus and ratchet down the debt ceiling as the surplus grows to assure that none of it is spent, received majority support, 54 to 46. But it fell short of the 60 votes needed because of a procedural challenge.

    The Senate also rejected, 54 to 46, a Democratic proposal, offered by Sens. Charles S. Robb (Va.) and Bob Graham (Fla.), that would have put off any tax cut until the solvency of Social Security and Medicare programs had been assured.

    The moderates' alternative largely sprang from the conventional wisdom that Clinton and the Republicans will be hungry for a compromise because the president wants to polish his image after his impeachment trial and the Republicans want to demonstrate they can govern effectively.

    Breaux, a chief author of the plan, argued that Congress and the administration could avoid a "train wreck" this fall over fiscal matters by splitting the difference in cost between the Republicans' and Democrats' tax proposals and incorporating elements sought by both parties.

    The plan he's been promoting would substantially increase the standard deduction, reduce the so called marriage penalty and provide a modest reduction in the capital gains and inheritance taxes on large estates.

    Yesterday, Clinton said that the Senate is facing a pivotal choice: whether to move forward with a sound tax policy "or to return to the reckless policies that threw our nation into stagnation and economic decline."

    While holding the door open to post-veto negotiations with the White House, Lott has made it clear he is wary of another round of deal-making in light of what he regards as Clinton's skillful but slippery bargaining tactics.

    "I've held out the olive branch all year . . . and usually what I have gotten in return is my hand has been bitten when I've reached out," he said.

    The mounting White House criticism of the Republican tax plan has made the situation even more difficult, the majority leader added. "This shrill criticism coming out of the White House, the distortion of the facts, make it awfully hard to seek any common ground," he said.

    © 1999 The Washington Post Company

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