Yesterday Was Tax-Cutting Day For The US Administration

Mike Godfrey, Tax-News.com, Washington

08 February 2001

During a very eventful day yesterday for the Republicans' tax-cutting proposals, President Bush held a press conference at the White House alongside 21 representative American families, Treasury Secretary Paul O'Neill had breakfast on Wall Street, quipping: "I didn't know whether I was going to have breakfast or be breakfast", the President met 22 business leaders who pushed for the tax measures they wanted, and then finally he met with 21 members of the tax-writing House Ways and Means Committee, some of whose Democrat members told him the tax cuts are unwise.

Paul O'Neill's closed-doors breakfast with leading members of the financial community, including Sandy Weill, head of Citigroup, apparently brought only support, with the Treasury Secretary saying to Reuters afterwards: "If there were any in the room that opposed the plan, they didn't speak up." O'Neill had earlier given support to the President's tax-cutting plans in a television interview, saying: "The president's program would use $1.6 trillion of $5.6 trillion dollars of the estimated surpluses over the next 10-year period, so I would argue there is plenty of room to do what the president proposes."

The President's 'tax family' love-in on the steps of the White House was directed as much as anything to countering the impression that proposed cuts will favour the rich, with a number of working-class families and several single mothers among the 21. Bush wanted to portray the cuts as opening up the road to economic self-improvement, saying: "It's as if our nation had erected a toll booth right in the middle of the road of the middle class, making it hard for people to access the middle class; making it hard for hardworking Americans to realize more money for their own. And so we're going to start dismantling that toll booth, brick by brick."

Later, the group of 22 business leaders arrived for lunch, including Donald Fisher, chairman of Gap Inc. and Stephen W. Sanger, chairman of General Mills. Members of the group argued variously for larger tax cuts, a reduction in corporate tax rates from 35% to 25%, or improvements in capital allowances rules - despite the President's insistence that his package is the right size, and its concentration on redeeming campaign pledges towards individual taxpayers. The group said it was also seeking a change in the tax code to a territorial basis of corporate taxation (it seems only yesterday that the US abandoned plans to impose the opposite - unitary taxation), so that multinational corporations based in the United States would only pay taxes on US-source income, and that it wanted to see an expansion of IRA and 401(k) programs.

In his session with House Ways and Means Committee members, President Bush faced pressure from friend and foe alike. Democrats concentrated on the dangers of such a large tax-cutting package, wanting to see a full budget proposal before agreeing to cuts, while some Republicans argued for larger cuts. Bush promised to submit a budget that "sets aside all the payroll taxes for Social Security, a budget that sets clear priorities, a budget that pays down the national debt and a budget that has got room for meaningful, substantial tax reduction.''

The President's performance was seemingly robust: Rep. Jennifer Dunn (R - Wash.) said afterwards that he "showed the strength of his backbone".

Democrat Rep. Richard Neal (D - Mass.), quoted in the New York Times, said: "We agreed to disagree; we disagree on the sheer size," while Rep. Michael McNulty (D - NY) said: "It is based on 10-year projections; I myself don't trust one-year projections, let alone 10-year projections.''

Mr. Bush plans to send the tax-cutting plan to Congress today, and made it clear yesterday one more time that he thought it was the right size, saying he would fight to keep the tax cut from wavering in either direction. "I think for those who want to diminish the size of the tax cut, that would be inadvisable, and for those who want to increase the size of the tax cut, that would be inadvisable," said the President, "It's the right size."

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