House And Senate Defer Decision On Tax Cuts

by Mike Godfrey, Tax-News.com, Washington

11 April 2003

House and Senate leaders finally reached a compromise agreement this week that will delay the decision on the exact size of President Bush's tax cut until later in the year. This will enable final passage of the remainder of the budget plans for fiscal 2004.

The decision sets something of a precedent, as it allows the two chambers to approve a budget for next year whilst advocating differing amounts in tax cuts. The Senate is currently approving a $350 billion package, whilst the House is willing to enable $626 billion in tax cuts.

Acknowledging that both sides have basically agreed to disagree on the matter, Senate Republican leader Bill Frist explained that: "There are differences between the House and Senate and in order to get a budget we need to recognize those differences and be able to address them later."

The tax writers from both chambers will now set to work on a final tax bill that will be presented by early summer. Republicans are hoping that by then greater optimism will prevail as a result of the victory in Iraq, thus strengthening the President's hand on economic issues. "This gives us the widest range of options to get the biggest tax cut," explained a spokesman for Dennis Hastert, House Speaker and Illinois Republican.

Some Democrats, meanwhile, are suggesting that the agreement is a ploy to give Republicans more time to push through a larger tax cut programme. They have pointed to a decision by the Senate parliamentarian, who interprets its rules, that a larger tax cut will require 60 votes in the closely divided 100 strong chamber. However, the Senate is able to overrule the parliamentarian, although this happens only rarely.

The Republican Party must overcome its own divisions before a larger tax cut can be passed. Party moderates including George Voinivich and Olympia Snowe are staunchly opposed to any tax cuts over the $350 billion mark, and the slender majority the Republicans have in the Senate effectively allows the moderates to dictate the final figure of the tax cut programme.

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