Horse-Trading Starts In Senate Over Tax-Cutting Bill

Mike Godfrey, Tax-News.com, New York

19 March 2001

This weekend saw a war of words in Washington as Republicans and Democrats fought over the fate of the President's $1.6 trillion tax-cutting bill in the Senate.

The President used his weekly radio address to pressurize the Senate: 'It is time for the United States Congress to give Americans some good economic news: tax relief for everyone who pays income taxes . . . . the House of Representatives has already passed a large part of my tax relief plan. Now it is up to the Senate. It is only common sense to give our economy a boost in a slowdown. Yet tax relief is more than common sense; it is a matter of principle. My tax relief plan is also a tax reform plan. It corrects some of the worst, most unfair abuses in our current tax system. And I would be recommending these changes in any economic circumstance.'

Mr Bush asked his listeners to talk to their senators about it. But one senator at any rate, Democrat of course, thinks the bill will fail. Senator Joseph Lieberman said on ABC's This Week, "I think it has died of its own weight. .. It is too large and therefore fiscally irresponsible." Some republican senators were also expressing doubts about the bill last week, but in some cases in the opposite direction. At the weekend Senator John McCain argued for more immediate and targeted cuts: "I would like to see working Americans, particularly those that still pay large payroll taxes and other taxes, get a greater benefit."

The administration still thinks it has the votes, but accepts that there may need to be some changes to the bill to get it through. One likely addition is a 'trigger' clause to deal with concerns that much of the surplus that is needed to pay for the tax cuts comes in the second half of the 10-year period covered by the bill. The trigger could alternatively moderate the cuts, in effect increasing taxes - likely to be anathema to the President - or it could cut spending programmes - likely to be anathema to Democrats.

The debate hasn't yet reached the pork barrel stage, either, when Senators have to be bribed by the attachment of spending commitments. Those senators who express doubts at this stage may really have them, or may just be constructing themselves the best bargaining position for a later stage in the process.

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