Senate Panel Begins to Write Own Tax Plan

The Senate Finance Committee begins work today on its own version of the Democratic tax-cut bill approved last week by the House, but it still is uncertain whether the plan can win enough Democratic votes to get it out of committee.

With much of the proposal still being revised, panel Chairman Lloyd Bentsen (D-Tex.) met with Democratic committee members Monday to outline part of the plan--which he had drafted as a starting-point--but he reportedly fell short of mustering sufficient support for committee approval.

Senate strategists said that it still is not clear whether Bentsen will be able to win the additional votes he needs today or whether the panel will face several days of internal wrangling that could jeopardize the legislation.

At least three key Democrats on the panel, David Boren of Oklahoma, Bill Bradley of New Jersey and John B. Breaux of Louisiana, are said to be opposed to the concept of raising taxes on the rich to help finance tax reductions for others--a key feature of Bentsen’s plan.

And while Bentsen hinted earlier that the package would contain most of the seven emergency economic growth provisions that President Bush had asked Congress to pass by March 20, his proposal would dilute them significantly, dampening any hope of substantial GOP support.

Bush has promised to veto any Democratic package that would finance tax reductions by increasing taxes on any group. The President’s own plan, which he outlined on Jan. 28, would have paid for the cuts partly by reducing spending and changing government accounting rules.

The plan that Bentsen is proposing closely follows the Democratic alternative tax cut plan that the House passed last week, with added provisions to broaden workers’ access to health insurance, designed to attract more votes in committee.

One major difference is in the tax cuts that the two measures offer for the middle class: Bentsen’s plan provides a $300 tax credit for each child to people earning less than $50,000 a year, while the House bill provides a tax credit of up to $200 for all workers.

Bentsen’s proposal also expands eligibility--by an amount still to be decided--for the earned income tax credit for the working poor. The bill passed by the House contains no such provision.

But the Bentsen plan also reduces the cut in taxes on capital gains--profits from the sale of stocks or other assets--by limiting the bulk of the benefits to middle-income taxpayers. The House-passed bill indexes capital gains for all taxpayers.

And it increases taxes on the rich slightly more than the House-passed bill--by adding a 36% maximum tax rate to replace the current 31% rate for high-income taxpayers. The House-passed legislation makes the top rate 35%.