Senate Moderates Force Reduction in Bush Tax Cut
Intra-party disagreements over how much of a tax cut the country can afford led Republican leaders down an unprecedented path for adopting a conference agreement on the fiscal year 2004 budget resolution. For the first time in history, a budget resolution – which sets tax and spending parameters for the year – has been crafted that allows the House and Senate to pass tax cuts that differ in size from one another. The $2.3 trillion budget resolution calls for a $350 billion tax cut in the Senate and at least $550 billion in tax cuts in the House.

In the early morning hours of April 11, the House narrowly approved a conference report on a budget resolution (H Con Res 95) sanctioning $550 billion in tax cuts over ten years. Seven Republicans joined their Democratic counterparts in opposing the measure, which passed by a 216 to 211 margin. The original House version of the resolution, approved in late March, provided for a tax cut of $726 billion – the sum President Bush requested.

The reluctance of moderate Republicans to support a massive tax cut helped slash the President’s proposal by more than half in the Senate, which also approved its version of the budget resolution at the end of March. In that narrowly divided body, Senators Olympia Snowe (R- ME) and George Voinivich (R-OH), insisted that a wartime tax cut not exceed $350 billion, while Senators Lincoln Chafee (R-RI) and John McCain (R-AZ) joined most Democrats in opposing any tax cuts at all.

Not wanting to give up on a higher figure, GOP leaders devised an unusual conference report on the budget resolution allowing the House and Senate tax writers to draft legislation providing for cuts of different amounts. This tactic – criticized by Democrats and anti-poverty advocates as a sleight of hand – was designed to delay a final vote on the size of the cuts until May when the House Ways and Means Committee and Senate Finance Committee produce tax legislation.

Procedural rules requiring 60 votes to pass legislation will ensure that the Senate’s version of the tax bill does not cost more than $350 billion. However, when the tax bill returns from conference committee with the House, it can be as high as $550 billion and will not be protected by the 60-vote rule – which means a tax cut of that size can pass in the Senate with just 51 votes.

Although the Republican leadership hopes to preserve the higher House tax cut figure in the end, Senate Majority Leader Bill Frist (R-TN) and Finance Committee Chair Charles Grassley (R-IA) were able to secure the votes of Snowe and Voinivich on the budget resolution conference report by agreeing not to support cuts higher than $350 billion. With such a pledge in hand, the two moderates voted in favor of the conference report, which passed the Senate April 11, by a 51-50 margin. Vice President Dick Cheney cast the tie-breaking vote. Senators McCain and Chafee joined all Democrats but one (Zell Miller of Georgia) in opposing the measure.

While still critical of a $350 billion tax cut, the human needs community is pleased that its intense lobbying effort helped slash the size of the president’s proposal in the Senate. As a result of the Senate’s action, the centerpiece of the Bush plan – the elimination of taxes on corporate dividends, a measure that disproportionately benefits the wealthy – is in jeopardy. It remains to be seen, however, if GOP Senate leaders will honor their pledge to party moderates during conference negotiations.

Anti-poverty activists are also relieved that the final budget resolution dropped the cuts to entitlement programs contained in the House version of the bill. Under the House plan, $465 billion would have been cut over the next ten years from Medicaid, Food Stamps, child care, school lunches, student loans, the Earned Income Tax Credit, veterans’ programs, Supplemental Security Income for poor elderly and people with disabilities, and other critical domestic programs. Advocates warned that these cuts would be devastating, especially since unemployment is high and states, facing serious budget shortfalls, have already cut spending on key social services.

Analysts with the Center on Budget and Policy Priorities caution, however, that the conference report establishes a new and complex procedure that requires various committees to identify possible spending cuts later in the year. It is unclear how this provision will affect low-income programs in the future. Experts also warn that the budget resolution could result in deficits of at least $1.3 trillion over the next ten years, seriously undermining the nation’s ability to fund Medicare and Social Security and otherwise maintain vital domestic programs.

Opponents of the GOP budget resolution are also critical of the fact that it does not account for the costs of war with Iraq. At the same time it was negotiating a budget resolution, Congress was also debating a $79 billion emergency supplemental bill to pay for the war and homeland security. Conference negotiations on the supplemental (HR 1559) were stalled over the addition of funds for special interest projects included in the Senate version of the bill, but Congress finally approved the measure on April 11.

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