US Budget Process Should Reach Voting Stage This Week

by Mike Godfrey, Tax-News.com, New York

08 May 2001

While the compromise budget bill hangs in the balance after a bad-tempered pre-weekend session of the joint House/Senate negotiating committee which seemed to go backwards rather than forwards, Treasury Secretary Paul O'Neill asked small business-people to lobby their Congressmen in support of the President's tax cuts.

The Treasury Department released a new analysis indicating that 77 percent of the tax relief triggered by cutting the top rate from 39.6% to 33% would go to small business owners and entrepreneurs, including farmers, partnerships and sole proprietorships, who mostly pay individual income taxes rather than corporate taxes.

The department also estimated that small businesses make up about 800,000 of the 1.3 million tax returns that would benefit from the lower 33 percent rate once it is fully phased in.

Mr O'Neill knows that the cut in the top rate doesn't have support in the Senate Finance Committee, where a majority of members prefer to target cuts lower down the income scale. 6.5 million businesses pay tax at the minimum 15% level.

Despite last week's problems on the negotiating committee, which saw Democratic House minority leader calling the proceedings a 'bad joke' after Republicans maintained the projected spending increase at only 4% rather than the 5% Democrats thought had been agreed, it's expected that a compromise budget resolution will be ready for a vote this week. The tax cuts remain at $1.35 trillion including $100 billion of extra cuts applying to the current year.

Once the budget resolution has been passed, both House and Senate must return to invididual bills which will enact the component parts of the tax-cutting package, including the reductions in income tax rates, repealing the estate tax, easing the marriage penalty on two-income couples and doubling the $500 child tax credit, among others.

The tortuous US legislative process seems likely to deliver some tax cuts eventually, but it presents a stark contrast to the situation prevailing just a few thousand miles to the east, where Tony Blair and George Brown can decide on tax increases over breakfast and have them voted through their puppet House of Commons by tea-time, if they so choose, such is the scale of their majority. And that majority is even expected to go up in upcoming elections, with a divided opposition led by a man who increasingly must see Michael Foot when he looks in his shaving mirror every morning.

Recommended