Democrats’ Tax-Cut Package Sent to Panel for Revisions

Efforts to push through a Democratic alternative to President Bush’s tax-cut package hit a snag Wednesday as disgruntled lawmakers forced House leaders to send the measure back to committee for revisions, including scaling back a proposed corporate tax reduction.

After a vocal meeting of the House Democratic Caucus, Speaker Thomas S. Foley (D-Wash.) ordered the tax package returned to Democrats on the House Ways and Means Committee, rather than sending it to the floor as some proponents had hoped.

Panel members quickly crafted several changes designed to assuage critics without altering the basic thrust of the Democratic plan, which calls for a temporary tax credit for working Americans, higher taxes on the wealthy, and several tax breaks for businesses and investors.

It was not clear if the revisions would be enough to win broad support. The Democratic Caucus is scheduled to consider the plan again today, and House leaders are expected to move the bill to the floor next week if the caucus voices its approval.

The major change proposed by committee Democrats would limit to two years a 1-percentage-point reduction in the corporate income-tax rate, currently 34%. The panel’s earlier plan would have made the tax cut permanent, but liberals said it would be unfair to give businesses a permanent break while providing middle-class Americans with only two years of tax relief.

Other revisions by panel members would relax current restrictions on the ability of small businesses to claim expenditures on new plants and equipment as immediate deductions rather than having to depreciate them over several years. Small businesses have been among key opponents of the bill.

Ways and Means members incorporated into the Democratic bill a provision proposed by President Bush to allow faster depreciation write-offs for future spending on new plants and equipment.

Congressional staffers said the two-year limit on the corporate income-tax reduction would reduce the five-year cost of the Democratic package by $7.1 billion.