House Republican leaders indicated yesterday they would trim back their ambitious tax plan by $72 billion as they struggled to cope with stiff resistance from moderates and fiscal conservatives who are questioning the pell-mell rush to pass a big tax cut.
The move, coming only two days after the Ways and Means Committee approved an $864 billion tax cut plan, was a sign of the trouble the GOP leadership is having passing a bill that many assumed would sail through Congress this summer. Republicans have made taxes their signature issue and put the White House on notice they would insist upon a large tax package in return for concessions on Medicare and other domestic spending.
But the leaders underestimated concerns within their own party about major tax-cutting. More than two dozen Republican members, including moderate Reps. Michael N. Castle (Del.), Fred Upton (Mich.), Marge Roukema (N.J.) and Ray LaHood (Ill.), have raised strong objections. With Democrats largely united against the GOP plan and Republicans holding only a slim, six-seat majority, the leadership is having trouble mustering enough votes to pass the bill next week.
The problems in the House came as Senate Republicans slipped in a series of significant tax measures -- including a plan to let wealthy people invest in tax-free savings accounts -- to the patients' bill of rights bill prior to the measure's final Senate approval Thursday night. The provisions were buried in a giant, 253-page amendment offered by Majority Leader Trent Lott (R-Miss.), and they provoked cries of protest from Democrats yesterday.
The House leadership's decision to scale back the tax plan to the size of a comparable Senate proposal -- from $864 billion to $792 billion -- was largely dictated by obscure budget rules that would have left the measure vulnerable to a challenge in the Senate. But leaders were also responding to pressure from within their own party to pare the bill.
House Speaker J. Dennis Hastert (R-Ill.) met yesterday with Republican moderates and fiscal conservative Democrats who complained that the $864 billion tax cut was too big and too reliant on uncertain surplus forecasts. Some also argued that the money could be better used to reduce the national debt, bolster Medicare and ease spending restraints on key domestic programs.
"My main objection is that the bill doesn't say a word about the $5.5 trillion national debt and how to bring it down," said LaHood, an influential moderate. "Very few members have read this 500-page bill, and you know there are things in it that will come back to haunt us."
Roukema said, "The numbers don't add up and the projections don't have credibility." She added that the GOP needs "to go back and reconstruct" the tax package.
House leaders had planned to bring the package to the floor next week, but now they may have to postpone action because there aren't enough votes to pass it. It was unclear yesterday whether the bill would be returned to the Ways and Means Committee for retooling, or whether leaders would modify the measure in the Rules Committee.
"From everything I've heard, we're moving full speed ahead, but anything is possible," said John Feehery, Hastert's spokesman.
In the Senate, Democrats fumed about Lott's sleight of hand in inserting tax measures in the patients' bill of rights legislation. Sen. Daniel Patrick Moynihan (N.Y.), ranking Democrat on the Finance Committee, called the maneuver "stealthy" and "a lot of mischief."
The provisions inserted included a GOP-backed initiative to boost medical savings accounts (MSA) -- under which individuals can set aside tax-free money to pay health care costs -- which have generally been opposed by Democrats. Critics say MSAs would be used mainly by affluent, healthy individuals as a substitute for medical insurance, increasing the cost of health insurance for poorer, less healthy people.
Also included in the amendment was a change enabling individuals with gross adjusted incomes up to $1 million to purchase Roth IRAs, savings accounts from which money can be withdrawn tax-free. The current income ceiling is $100,000.
Republicans said the change would bring in $5.5 billion over five years, as wealthier individuals cashed in their regular individual retirement accounts and paid the taxes on them, and converted to Roth IRAs. The estimated revenue would offset the costs of a major new benefit that was also included in the amendment: tax deductions for long-term care bills.
However, congressional budget analysts said that over 10 years, the Roth IRA provision would cost the federal government $4.2 billion in lost revenue, because savers pay no taxes as they begin withdrawing money from those accounts in their old age.
At the same time, Sen. Bob Graham (D-Fla.) said he was "incensed" by the Lott amendment's repeal of an experiment in Arizona and Missouri in which health maintenance organizations bid competitively for Medicare business. The experiment is opposed by major health maintenance organizations, according to Democratic sources.
Meanwhile yesterday, Sen. William V. Roth Jr. (R-Del.), chairman of the Finance Committee, unveiled a $792 billion tax cut plan that included tax reductions for family, savers, industries, small business, and nonprofit corporations. The plan cuts the rate on income earned in the bottom tax bracket from 15 to 14 percent.
Roth described the plan as one that avoided radical new initiatives and represented a "consensus" between Republicans and Democrats. The plan would scale back tax breaks in the House bill for multinational companies as well as timber, insurance, steel and defense companies.
"This is a tax cut package that can be embraced by members on both sides of the political aisle," Roth said. "With the president's help, we can work together to provide significant tax relief for all working Americans."
A dozen or more Senate Democrats, including John B. Breaux (La.), Bob Kerrey (Neb.) and Robert G. Torricelli (N.J.), would likely support a larger and wider-ranging tax package than the $250 billion of targeted tax cuts advocated by the Clinton administration. Even so, Finance Committee Democrats indicated yesterday they were united in opposing the Roth plan and instead would offer a $295 billion alternative.
The White House signaled some new willingness to work toward a tax-cut deal with the Republicans. "Perhaps if we could come together and do something significant on Medicare . . . that would certainly be a major step toward moving forward in other areas," said Gene Sperling, the White House's national economic adviser.
Staff writers George Hager and Helen Dewar contributed to this report.