$100 billion tax-relief bill faces a skeptical Senate

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The House narrowly passed a $99.5 billion tax-relief measure for corporations and individuals Wednesday and sent it on to a Senate sharply divided over the type and size of economic stimulus package that ultimately will be delivered to President Bush for his approval.

Checks for low-income Americans who did not receive tax rebates this summer likely will be in any final bill, and so will faster tax write-offs for business investments. Beyond that, the final elements depend on how Republican and Democratic senators and the White House resolve their differences.

Judging from the heated House debate, the Senate deliberations will not be easy. Democrats who run the upper chamber want more spending for unemployment compensation and health premium subsidies for laid-off workers, while the GOP, following Bush's lead, wants the bill to focus on tax reduction.

Bush endorsed the House package Wednesday but Democratic sources in the Senate called his support "passive," meaning they believe the president has yet to specify what he will accept. His treasury secretary, Paul O'Neill, engaged in quiet negotiations on Capitol Hill expected to extend into next week.

In a speech during a visit to a Maryland printing company Wednesday, the president urged the Senate to act quickly on the package, saying, "Part of the war we fight is to make sure our economy continues to grow." He added that the House-approved bill would be "good for workers."

But that was a sharply debated point in the House, which engaged in the most heated partisan rhetoric on Capitol Hill since the Sept. 11 terrorist attacks. Like the fight earlier this year over Bush's $1.35 trillion tax cut, the debate once again exposed sharp philosophical differences between the two parties over taxation.

The GOP argued strenuously for the $60 billion in business tax relief in the measure, including $26 billion in rebates to corporations resulting from a repeal of the corporate alternative minimum tax retroactive to 1986 and other tax breaks designed to boost investment.

House Minority Leader Richard Gephardt (D-Mo.) called it a "giant tax giveaway to the largest corporations and the wealthy."

Rep. Gerald Kleczka (D-Wis.) said, "The Treasury is being looted today."

But Republicans said helping businesses in the current climate is justified. Rep. Bill Thomas (R-Calif.), chairman of the House Ways and Means Committee, said assistance is needed for companies as "job-creating machines" that would ultimately help laid-off workers get new jobs.

"We need to put our foot on the gas right now," Thomas said, contending that the measure would give a major boost to an economy that the Federal Reserve said Wednesday remained weak into the first few weeks of October.

In opposition, Democrats pointed to some of the huge tax rebates that corporate giants would receive under the bill. For instance, IBM would receive $1.4 billion in tax rebates, and General Motors $833 million, they said. The GOP said the rebates would go to 23,000 U.S. companies, large and small.

There were few defections in the final tally. Three Democrats joined the Republican majority, while seven Republicans voted against the bill.

Rep. Robert Matsui (D-Calif.) said the package should be tilted more heavily in favor of consumers who have scaled back their spending since the attacks. Adding a harshly partisan note, he said Republicans "want to pay off their contributors."

The House defeated on a 261-166 vote a Democratic alternative that limited the amount of tax relief and provided a 26-week extension of unemployment benefits and a 75 percent subsidy for COBRA health-care premiums for laid-off workers. Some of these same provisions are contained in a $70 billion bill pushed by the chairman of the Senate Finance Committee, Sen. Max Baucus (D-Mont.).

House Speaker Dennis Hastert (R-Ill.) called the measure "fair and balanced" in the way it meted out tax benefits to individuals and companies.

The checks of $300 to individuals, $500 to heads of households and $600 to couples would go to lower-income workers who did not receive tax-rebate checks this year. Also, those who did not receive checks for the maximum amount earlier would receive another check to make up the difference.

The bill contains a Bush recommendation to reduce the 27 percent tax bracket to 25 percent on Jan. 1, 2002, instead of 2006 as scheduled under the president's $1.35 trillion, 10-year tax program approved earlier this year.

Also, the capital gains tax would be reduced to 18 percent from 20 percent for most taxpayers through eliminating a five-year holding rule for assets. A tax break for financial services firms that do business overseas would be permanently extended. Companies could use net operating losses over the next three years to cut tax payments over the previous five years.

Sen. Dick Durbin (D-Ill.) said the outcome in the Senate is highly uncertain, but he added "there is a world of difference" between the House bill and the Senate's inclinations.

Another measure to watch, he said, is a $20 billion spending package by Sen. Robert Byrd (D-W.Va.), chairman of the appropriations committee. It would include funds for Amtrak, airport security, border control, the FBI, police and fire departments, and measures to fight bioterrorism, he said.

Copyright © 2014, Los Angeles Times
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