Senate vote means tax cut on the way

Compiled from Times wires

© St. Petersburg Times, published May 24, 2001

WASHINGTON -- The Senate Wednesday passed a $1.35-trillion, 11-year tax cut, handing President Bush a major victory and all but ensuring that Congress will soon approve the largest package of tax relief in 20 years.

In the 62-38 vote, 12 Democrats joined all 50 Republicans in support of the bill, which appeared likely to become the final achievement of the Senate's Republican leadership. (Florida's Democratic Sens. Bob Graham and Bill Nelson voted against the plan.) The Senate is braced for an imminent shift to Democratic control if Sen. James Jeffords of Vermont, as expected, announces he is quitting the Republican Party.

Immediately after the vote, legislative leaders scrambled to form a House-Senate conference committee that could quickly negotiate a compromise between the Senate bill and the $1.6-trillion tax cut already passed by the House.

Because of procedural issues, House-Senate negotiators had to wrap up their work Wednesday night or this morning for both chambers to vote on the final product by Saturday.

The Senate and the House have now approved lower income tax rates across the board, although the Senate would concentrate more of its benefits at the low end of the income scale. Both chambers have also endorsed additional tax reductions for married couples, a larger tax credit for children, more liberal retirement accounts and relief from estate taxes.

The House-passed bill closely tracked Bush's initial proposal, and the Senate bill included many of Bush's provisions in somewhat scaled-back form. Tax cut proponents predicted that House and Senate negotiators would iron out their differences quickly enough for a final bill to sail through Congress by the end of the week, while the Senate remained in Republican hands.

"Tax relief is on the way," declared an enthusiastic Bush, who has made the tax cut his paramount domestic goal. Urging Congress to reach a rapid final accord, he said at the White House: "Our economy cannot afford any further delays."

Sen. Trent Lott, R-Miss., whose reign as Senate majority leader appeared to be drawing toward a close, expressed optimism that tax relief would soon become law.

Republicans cheered the vote as an emphatic statement that Americans should be able to hold on to more of their income, rather than ship it to Washington. They expressed hope that tax relief would infuse the economy with new vigor.

An amendment by Sen. Orrin Hatch, R-Utah, to make permanent a business tax credit for research and development was added to the bill Wednesday. The tax credit, due to expire in 2004, is a favorite of high-tech companies.

But most of the 54 amendments proposed to the bill during three days of rancorous debate were offered by Democratic opponents, who complained that its benefits were skewed toward the wealthy and that it could ultimately starve the government of the funds necessary for future domestic spending needs. Some of these amendments came within a few votes of passing.

"I believe with all my heart we will regret the day this passed the Senate," said Sen. Tom Daschle, D-S.D.

The challenge for Republicans and the White House is to craft a final bill that will be acceptable to the more conservative House without alienating a bipartisan group of Senate moderates.

Fifteen senators, led by Democrat John Breaux of Louisiana and Republican Olympia Snowe of Maine, circulated a letter urging that the House-Senate conference committee adhere closely to the Senate bill, which delivers more benefits to low-income workers than Bush's original plan.

"The final result is going to have to be fairly close to the Senate position," said Sen. Max Baucus, D-Mont. "It's balanced, and now it's time for us to move forward."

There were signs the House was coming closer to the Senate position in crucial areas. Bush and House Republicans wanted to reduce the top tax rate to 33 percent from 39.6 percent. The Senate bill would lower it to 36 percent. The House may accept a number closer to the Senate, along with a plan to liberalize rules for taxpayers who itemize deductions.

While the Senate bill includes most of Bush's original $1.6-trillion plan, senators engaged in some legislative contortions to squeeze all the proposals into a smaller, $1.35-trillion package. For example, the tax cuts in the Senate bill would not fully take effect until 2007. The House wants to speed that up.

The Senate bill also would delay until 2005 provisions to address the "marriage penalty," a quirk in the code that forces some couples to pay higher income taxes than if they were single. The plan, like the House bill, would double the standard deduction and 15 percent tax bracket for joint filers to twice that of singles. Neither bill would repeal the estate tax until 2011.

There also appeared to be growing support to retain a provision of the Senate bill that would double the per-child credit to $1,000, as Bush wanted, while also making more of it refundable to help low-income workers who do not pay income tax.

House Ways and Means Committee Chairman Bill Thomas, a California Republican, has been talking with senators for the past week while the bill has lingered on the floor. Lawmakers said there was a realization in the House that they would have to accept many of the Senate changes.

Another issue for negotiators is whether to alter the package to provide more tax relief more quickly, possibly in the form of rebate checks.

The Senate bill would provide a short-term stimulus via two retroactive tax cuts. It would carve a 10 percent rate out of the 15 percent income tax bracket for the first $6,000 of taxable income for singles and $12,000 for joint filers, effective this year. The first $100 increase in the child tax credit would be retroactive to 2001.

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