WASHINGTON (AFX) - The U.S. Congress is without a consensus on the size of tax cuts, days before President George Bush sends his 1.6 trln usd ten-year package to the legislature.
In a series of briefings with reporters, members of Congress exhibited divisions on the appropriate size of the tax cut, with some Republican members eager to add to the White House proposal, and Democrats in favor of a smaller plan.
House Republican majority leader Richard Armey said in a note to fellow legislators that "even 2.6 trln usd (in tax cuts) to the people who earned their money is not unreasonable."
Armey explained in a briefing that the size of the projected ten-year surplus, of 3.1 trln usd excluding Social Security, allows for consideration of further tax cuts.
Beyond Bush's across-the-board marginal income tax reduction, Armey suggested cuts in the capital gains tax, and retirement account tax credits, along with a cut in the so-called alternative minimum tax.
Congressional Democrats, however, argue that even Bush's proposal is too big, because long-term surplus projections are risky, the plan does not account for lost interest savings on public debt which will not be paid down.
The President's tax cut endangers a return to budget deficits, cautioned Kent Conrad, senior Democrat Senator on the Senate Budget Committee.
"Yellow lights are flashing," Conrad said in a press briefing. Conrad has said the Democrats could support 750 bln usd in tax cuts. Meanwhile, Republicans in the Senate warned House Republicans on trying to enlarge Bush's proposal.
Republican Senate majority leader Trent Lott said in a briefing that "the greatest danger is that we get carried away." Pete Domenici, senior Republican Senator on the Senate Budget Committee, said a number of House Republicans plan to introduce separate bills with over 2.0 trln usd in tax relief.
"My guess is they will not succeed," Domenici said in a briefing. The first legislative step towards approving a tax cut will be a budget "resolution" in the Senate Budget Committee, on the overall size of the package.
Domenici said two to four Democrats on the committee are leaning towards Bush's plan, but cautioned he as yet had "no game plan" for getting a majority vote of support.
All Senate committees are divided 50-50 between the Republicans and Democrats, reflecting the even split in the upper chamber. Olympia Snow, Republican Senator on the committee, said even 1.3 trln usd "could be the high water mark... it will be a real challenge to get bipartisan support for (a 1.6 trln usd) tax cut."
Charles Grassley, senior Republican Senator on the Senate Finance Committee, recognised that a number of lobbies are pushing for significant business tax cuts to be included in the final package, but said there is little room for this.
Bush's plan focuses on individual tax cuts, with a small part designated for a permanent corporate research and development tax credit.
While some members have proposed having a second tax cut bill to address business tax cuts, Grassley said there would likely be no room left for further significant tax cuts.
"Some are proposing (accelerated) depreciation allowances, up to 347 bln usd over ten years... It's very difficult to do that as a second bill, even a year from now," Grassley said.
Domenici agreed: "I don't see how there's room for a (second bill)."
"I don't believe that there's going to be any significant business tax cut in this package," Domenici added, referring to the end result.