CHN: House Passes Income Tax Rate Reduction Bill
Senate Action Not Expected Until April
Despite House passage of a package of income rate tax cuts worth nearly $1 trillion over ten years, overall progress on the FY 2002 budget has been relatively slow since President Bush submitted his budget outline to Congress on February 28. The House Budget Committee is expected to mark up its version of the FY 2002 budget resolution the week of March 19. The Senate Budget Committee, however, is not expected to act on its version because Democrats and Republicans on the committee, where membership is divided evenly between the two parties, have not been able to agree on a budget framework for the year. Instead, the Senate budget resolution is expected to bypass the committee and move straight to the Senate floor on or after April 1, as is provided for under budget rules.
Despite relatively slow progress on the budget overall, House Republicans have not hesitated to use the past few weeks to aggressively push their tax cut agenda. On March 8, the House passed a $958 billion ten year income tax rate reduction bill (H.R. 3). The bill passed by a vote of 230-198 and drew the support of ten Democrats. The bill passed after a Democratic alternative was rejected by a vote of 155-273.
House Ways and Means Chairman Bill Thomas (R-CA) said on March 15 that the House will consider at least three more tax bills in the weeks ahead. According to Thomas, his committee will mark up a second tax bill on March 23 and a third on March 28. Those bills are expected to be considered on the House floor on March 29 and April 5, respectively. Each of those bills would reportedly contain additional portions of the overall tax plan backed by President Bush and together could cost up to $500 billion over ten years. The House would then take up a fourth bill after a two-week break in April. That bill is expected to contain additional tax cuts backed by congressional Republicans that were not included in the Bush plan and could cost an additional $200 billion over ten years. According to Thomas, the total cost of the four bills could exceed the $1.6 trillion (not including associated interest costs) advocated by the president. House Majority Leader Dick Armey (R-TX) and Majority Whip Tom DeLay (R-TX) have said that they will back a package totaling $2.2 trillion over ten years, not including interest costs.
The Senate, with its 50-50 split between Democrats and Republicans, is expected to proceed more cautiously. Senate Budget Committee Chairman Pete Domenici (R-NM) has indicated that the Senate budget resolution will only provide for the $1.6 trillion tax cut the president asked for. Despite reservations, he has also said that he will also make every effort to hold discretionary spending to the four percent level of growth the president requested. Senate Appropriations Committee Chairman Ted Stevens (R-AK) has also given the spending limit a cautious endorsement, but said that appropriators would reevaluate the proposal after they see a more detailed version of the president’s budget, which is expected to be released on April 3.
While no progress in the Senate has been made, several senators have nevertheless taken the opportunity over the past several weeks to advocate an assortment of positions on tax cuts. On March 15, Sen. Robert Byrd (R-WV) addressed members of Tax Fairness for All, an anti-tax cut coalition in which the Coalition on Human Needs is an active participant. Byrd is upset that the Senate Budget Committee is making no attempt to overcome partisan divisions and devise a plan acceptable to both parties. Noted for his devotion to Senate rules, he is also upset that the budget reconciliation process is being used to evade the filibuster and the corresponding requirement to obtain the support of 60 senators before any bill is passed out of the Senate.
Perhaps surprisingly, Senate Majority Whip Don Nickles (R-OK) has said that he supports moving a tax bill under “regular order” to honor Byrd’s wishes. Moving a tax bill under regular order would require the support of 60 votes, but would also allow a permanent tax cut to be enacted. Under current budget rules, a tax cut protected by and passed under a budget resolution can only last for five years. Nickles did not offer any corresponding deals to Senate Democrats, however, and his offer is not expected to come to anything.
Tax Cut Trigger
Several moderates in the Senate who seem to hold the fate of the president’s tax cut in their hands have also come out in support of some form of tax cut “trigger” that would stop or reverse the tax cut if projected budget surpluses do not materialize. At least for the moment, a trigger idea is being opposed by both the Republican and Democratic congressional leaderships and by the White House. The president has expressed concern that spending increases could lower the surplus and subsequently trigger off his tax cuts. Democrats have argued that the trigger would likely be ineffective, but could nevertheless draw the support of enough moderates to ensure passage of the president’s plan.
In the 1980s, when the nation was facing spiraling budget deficits in the aftermath of the Reagan-era tax cuts, Congress enacted a similar trigger mechanism as part of the Gramm-Rudman-Hollings balanced budget law. Under that law, spending cuts were supposed to be automatically triggered if budget deficits exceeded certain prescribed targets. The law never worked as planned, however, because subsequent Congresses used a series of budget gimmicks to avoid the automatic cuts. More recently, Congress included discretionary spending caps in the 1997 Balanced Budget Act which were supposed to severely curtail growth in domestic and defense spending. Those caps were later ignored. Given this track record, it is reasonable to expect that any trigger would either be evaded through budget gimmickry or ignored altogether.