President Bush yesterday scuttled a Republican agreement to extend three expiring middle-class tax cuts for two years, deciding instead to push for a more costly five-year extension when Congress returns in September.
On Tuesday night, congressional GOP leaders agreed to a modest, two-year extension of an expanded, 10 percent income tax bracket, a tax break for married couples and a $1,000-per-child tax credit. Congress passed those tax cuts last year, and they will expire at the end of 2004 unless Congress acts.
But White House officials urged Republicans to hold out for a longer extension more in line with the president's call to make the tax cuts permanent. Chief of Staff Andrew H. Card Jr. put in a round of angry phone calls Tuesday night, several Senate aides said. Then White House counselor Karl Rove and Bush himself called GOP tax writers yesterday urging them to kill the deal.
"I won't officially pronounce it dead, but let's put it this way: It is expiring," said a senior Republican tax aide, who spoke on the condition of anonymity to detail backroom negotiations.
"This is a classic situation where, when someone advocates all or nothing, nothing generally wins," said Sen. John Breaux (D-La.), who had backed the two-year proposal. "We're at real danger that we may get nothing."
A senior administration official, speaking on the condition of anonymity so he could discuss legislative strategy, said Bush is confident that the gambit will work. Democrats and some moderate Republicans have pushed a shorter extension, offset by tax increases to reduce its impact on the budget deficit. But come September, the official said, the vote will be overwhelming for a longer extension without offsets.
"Do we run a risk?" the official said. "As this year has shown, it's very difficult to pass even what many would say is common-sense legislation. In this business you always run a risk." But, he added, "the Democrats don't want to be on the wrong side of family tax relief. . . . In this case a filibuster will be seen as stopping those tax cuts."
The White House's forceful actions left congressional Republicans scratching their heads. Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) said earlier this month that he wanted to delay considering a tax cut extension bill until September.
But Bush called him to the White House earlier this month to demand action before Congress recesses for the political conventions this summer. At that time, the president expressed the fear that September's short congressional session would be so politicized that nothing would get done and the tax cuts would expire.
House Republican leaders had expressed their satisfaction with a two-year extension on Tuesday, saying it would allow the issue to come back in time for the 2006 congressional elections.
In the end, Bush turned down the deal before it could even reach the House or Senate floors for a political showdown.
"The calculation was: 'We want to get a bill, and if we don't get a bill, we'd at least have an issue,' " said one Senate Republican tax aide. "Now they don't have a bill, and they don't have an issue. They had a deal, and they walked away from it."