Eager to sign his fourth tax cut in as many years, President Bush is pushing congressional leaders to extend a series of middle-class tax cuts before Congress's planned adjournment at the end of the week.
Democrats charge that the president is trying to ram the tax cuts through in time to hold a signing ceremony during their convention next week.
To move the tax package quickly, Republican leaders in Congress want to revive moribund negotiations on an expanded child credit for the working poor and amend it to extend tax cuts for married couples, middle-income families with children, and lower-income workers. Because the package would emerge from House and Senate negotiations on the child credit issue, lawmakers would be presented a take-it-or-leave-it tax package before they adjourn until September.
But Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) may balk at what even some Republicans see as a strong-arm tactic, according to senior Finance Committee aides. And a bipartisan group of senators is pushing a far more modest, one-year tax cut extension that would close loopholes and raise fees to ensure the package does not expand the record budget deficit.
"Grassley doesn't want to cram down a bill without real consideration," said a senior Senate Republican tax aide, who spoke on condition of anonymity to be more frank about political tactics. "Some want this as a political exercise, to force the Democrats to take more than they want or to force them to block it before the conventions. Grassley wants a bill that can pass."
The tax cuts themselves have broad, bipartisan support. They include an expansion of the lowest, 10 percent income tax bracket, a $1,000-per-child tax credit and tax relief for middle-income married couples. If Congress fails to pass them this year, those tax cuts would expire at the end of 2004, effectively raising taxes next year for most families that pay income taxes. The package would also include a provision to prevent the alternative minimum tax (AMT) from rapidly expanding next year.
"Our intent is to have middle-class tax relief passed," said House Ways and Means Committee spokeswoman Christin Tinsworth.
But the scope of the package is in dispute. House GOP leaders and the White House want a five-year extension of the three middle-class tax cuts, with a one-year AMT fix, a package that would cost the Treasury up to $130 billion. Some House Republicans are pushing for an expanded child credit that would extend eligibility for the credit to families with incomes as high as $309,000. Currently, the full credit is available to families with incomes up to $110,000.
Grassley aides called that "an overreach" that could sink the whole package, though administration officials expressed confidence that expanding the child credit to higher-income families "would not be an issue" in the end.
The desire to trim expectations was underscored yesterday, when Sens. Olympia J. Snowe (R-Maine), Blanche Lincoln (D-Ark.), Max Baucus (D-Mont.), John McCain (R-Ariz.), Lincoln D. Chafee (R-R.I.) and John Breaux (D-La.) endorsed a far more modest approach. Citing a budget deficit that will top $400 billion this year, the senators proposed a one-year extension of the middle-class cuts, with the $30 billion cost fully offset by closing tax shelters and raising customs fees.
"This straightforward proposal clearly demonstrates that we can extend important tax relief to working families in a fiscally responsible manner," Snowe said in a statement yesterday.
GOP leaders are expected to unveil a compromise package today or Wednesday.
Liberal advocacy groups have decried the tax cut push as a cynical distortion of an effort to help poor families. When Congress passed a 10-year, $350 billion tax cut last year, lawmakers sped up income tax cuts and an expanded child tax credit for middle- and upper-income families, but neglected to accelerate an expansion of tax refunds for poor families.
The political fallout from that decision led the Senate and House to pass competing versions of a broader tax refund for poor families with children. The Senate's plan would have provided $1.8 billion in tax rebates, with the cost offset by customs fees. For more than a year, congressional leaders have made no effort to reconcile those bills -- until now.
"In this manner, a bill to benefit low-income working families without enlarging the deficit [will] be turned into a bill primarily to benefit other families, including high-income families, and to add substantially to the deficit," the liberal Center on Budget and Policy Priorities stated last week.
But congressional Democratic leaders have signaled they have no intention of blocking an extension. If nothing is done, the $1,000 child credit would shrink to $700. Most married couples would see their standard deduction shrink. Changes in the tax brackets would increase the bill for some of the lowest-income taxpayers.
Even the Senate Republicans who would like to see the cost of the package "paid for" would not say they will vote against it if it does expand the deficit.
For Bush, the priority is simply to get something done before Congress leaves. Grassley had said the extensions could wait until September, but the president summoned the Finance Committee chairman to the White House on July 9 to demand action this week. White House officials reason that partisan politics will derail any substantive legislation during Congress's brief fall session.
"The president calls for the Congress to act on this in virtually every speech he gives," said White House spokeswoman Claire Buchan. "It is a high priority for the president."
Democrats suspect another motive: a presidential bill-signing ceremony, possibly during the Democratic convention next week.
"The president is hurting so badly right now, and even congressional Republicans, this is the one thing they can say they've gotten for the middle class," said Rep. Robert T. Matsui (D-Calif.). "I guess on the nightly news, you could have a situation where you have Democrats all excited in Boston, and meanwhile back in the White House, the president just signed a bill giving middle-class tax relief."