Divisions over health care, tax cuts slow stimulus plan

WASHINGTON -- Deep divisions between Democrats and Republicans over health care for the jobless and tax cuts for businesses and individuals slowed negotiations Friday on legislation aimed at stimulating the listless economy.

Both sides agree that unemployed people need help paying for their health insurance but differ on how to provide it. They also disagree on whether to accelerate some of the income tax rate cuts enacted earlier this year and whether to repeal the corporate alternative minimum tax.

"We're touching on the land mines," said Rep. Charles Rangel of New York, senior Democrat on the House Ways and Means Committee.

The talks broke up Friday without an agreement, but both sides said progress was being made. Negotiations were set to continue today and possibly Sunday.

On health care, Democrats favor a direct subsidy, or perhaps a tax credit, that would pay 75 percent of the costs of the COBRA insurance policies available for laid-off people who had employer-provided coverage. They also want beefed-up Medicaid payments to states so that people not eligible for COBRA could also be covered.

After initially offering only grants to states for health coverage, President Bush and congressional Republicans now favor a 50 percent tax credit that would be immediately available for an unemployed person to pay for the health insurance coverage of his or her choosing.

"Why not say you can go out into the individual market?" said Rep. Bill Thomas, R-Calif., chairman of the Ways and Means Committee. "An employer-based health care system is fatally flawed."

But Senate Majority Leader Tom Daschle, D-S.D., said this would force people to search for their own coverage, where they may encounter problems with pre-existing health conditions and high costs.

"It is a difficult thing for many of these people, if not impossible, and that's why it's very important to us" to stay within the existing system, he said.

Tax cuts are another huge sticking point. Thomas said he made a new offer Friday involving acceleration of more than one income tax rate cut -- he added it would cut the package's total price tag by $20-billion -- but was rebuffed by Democrats because it would reduce the top rate paid by the wealthiest people.

So far, Democrats have shown a willingness to consider cutting only the 27 percent rate to 26 percent as soon as 2002. Bush and the Republicans want the rate to drop to 25 percent next year, four years earlier than under current law.

Given GOP concessions on health care and a broad 13-week extension of jobless benefits, some Republicans wondered why Democrats won't readily agree to their proposal on the income tax rate cuts.

"The rate thing ought to be a no-brainer. The Democrats are getting everything they want," said Sen. Charles Grassley of Iowa, ranking Republican on the Finance Committee.

On the corporate alternative minimum tax, Thomas said options short of complete abolition included repealing it temporarily or allowing companies to take more credits and deductions against the tax during the economic downturn.

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