Joint Congressional Committee Agrees $1.35 Trillion Tax Cuts

by Mike Godfrey, Tax-News.com, Washington

02 May 2001

The joint House and Senate Congressional Committee which has been working on a compromise budget resolution yesterday agreed on a compromise figure of $1.35 trillion in tax cuts over the next 11 years, but has still not agreed on a figure for spending totals.

Democrat Senator John B. Breaux of Louisiana has played a key role on the Committee, leading a group of 13 other centrist Democrat and two Republican senators. He said he would support the compromise if he was satisfied with the final spending figure. Senior Republican leaders weren't very pleased however: Dick Armey, the House Majority Leader, said he would support the deal, but 'not very happily'.

President Bush declared victory in a Rose Garden briefing: "We have more work to do to complete the full budget," Mr. Bush said, "but today we have accomplished significant tax relief and shown we can work together in a constructive way to get things done for the people of this country."

The agreed plan is based on the $1.25 trillion voted through the Senate two weeks ago but adds on a further $100 billion of cuts in the current year in order to stimulate the economy, taking the total to only £250 billion short of the President's original request.

The original plan called for reducing all income tax rates, doubling the child credit, giving a break to two-income married couples and repealing the federal tax on large estates (the death tax). Senator Trent Lott of Mississippi, the Republican leader, said $1.35 trillion would not be enough to accommodate all of these features, but that it was too early to say which parts would survive.

The budget resolution which the Committee has been working on sets guidelines for taxation and spending; but individual bills are still needed to implement tax and spending measures. The budget resolution does not need the President's signature and is not binding - but once Congress has reached a difficult compromise such as the present agreement on taxation, it is unlikely to upset it in subsequent legislation.

Now the Committee has to deal with the spending side of the equation. Mr Bush had asked for an increase of only 4% over the current year, which the House had agreed; but the Senate wanted 8%. Last night the figure under discussion was 5%.

Congress is less likely to stick to a spending compromise at this level, but it's not clear how the pressures for additional spending can be squared with its commitment to avoid a return to budget deficits, not to mention the fact that many Republicans want to seek additional tax cuts this year beyond those called for in the budget.

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