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Personal Finance > Taxes
Bush tax cuts gain support
January 22, 2001: 8:01 p.m. ET

Democrats moving toward tax rate cuts espoused by President Bush
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WASHINGTON (CNN) - Democratic lawmakers are moving away from the targeted tax cut approach advocated by the Clinton-Gore team last year and toward the tax rate cut preferred by President George W. Bush, sources on both sides of Capitol Hill said Monday.

The shift in sentiment was reported as Sen. Phil Gramm, the Texas Republican, introduced a $1.3 trillion tax cut plan based on the campaign promises of Bush. He had a single Democratic co-sponsor, Sen. Zell Miller of Georgia.

graphicThat legislation calls for replacing the five current tax rate brackets which run from 15 to 39.6 percent with four new rate brackets: 10 per cent, 15 per cent, 25 per cent and 33 per cent. It also doubles the child tax credit from $500 to $1,000, reduces the so-called marriage tax penalty and repeals the inheritance tax.

Miller came to the Senate last year, appointed to fill the term of Sen. Paul Coverdell, a Republican who died suddenly. He is a fiscal conservative who cut state taxes by $1 billion while governor of Georgia.

"Right now, our taxes have never been higher. Right now, our surplus has never been greater," he said at a press conference. "To me, it's just common sense you deal with the first by using the second. Remember that old Elvis Presley song, 'Return to Sender?' That's what we want to do right now."

While Democratic sentiment has changed in the last month, most Democrats still object to the size of the tax cut and say it needs to be aimed at middle income taxpayers, not the wealthy.

In an interview with CNN, Senate Democratic Leader Tom Daschle said there is room for compromise on the issue. 

"I think the compromise first and foremost would have to include the size taking into account all the needs we have especially paying down the public debt," he said. "Secondly, I think it's important that we find the right balance between targeted cuts and some sort of rate cut. Finally, we have to ensure that the bulk of the real benefit goes to those who need it the most."

graphicDemocrats in the House and Senate said there has been significant movement within the Democratic caucuses about tax cuts since the election. This reflects the reality of Bush's election, the slowdown of the economy, and larger-than-expected surplus projections.

Moreover, a senior House aide said Democratic leaders feel that the party's candidates were hurt by their insistence upon targeted tax cuts last year because Republicans were able to paint them as tax cut opponents.  

One Senate aide familiar with the work being done by Democrats on the Senate Finance Committee said Democrats also believe that Bush only has a six-month window to pass a large tax cut. If the economy slows down, the updated surplus figures released next summer will reflect a proportionate decline in government revenue.

This will alarm fiscal conservatives in both parties who favor paying down the national debt and worry about dipping into the Social Security surplus to pay for government spending.

Moreover, defense hawks in the Republican Party are talking about dramatic increases in defense spending that could force cuts in domestic spending programs if the surplus shrinks.

Some Republicans, including House Speaker Dennis Hastert, had recommended Bush break his tax package down into bite-sized pieces, all the better to sell it to the public.

graphicSenate Majority Leader Trent Lott told CNN in an interview that the GOP leaders have not decided how to proceed. All tax bills must originate in the House.

"We should talk to the president about his options and how we handle it procedurally," said Lott.

"I do not think that the American people want to get too deeply into that, but the House could move these tax bills through in pieces much easier than the Senate ... I think we should see how we can move it as early as possible, that would be our focus, without getting caught up in procedural questions," Lott said.

In recent years, Republican leaders have tried to schedule tax legislation for mid-April to coincide with the national federal income tax filing deadline of April 15.      graphic





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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.