Bush Gives Ground on Tax Cuts, Jobless Aid to Revive Bill

In a last-ditch effort to revive legislation to improve the economy, President Bush offered Tuesday to scale back his proposed cuts in corporate and individual taxes and beef up aid to the unemployed.

Bush tried to break a stubborn impasse by offering his compromise to a small, bipartisan group of centrist lawmakers who are crucial swing votes in the narrowly divided Senate.

Bush’s proposal “forms the basis for reaching an agreement,” said Sen. John B. Breaux (D-La.), a leader of the centrist group. “It’s something I would like to support.”

However, the compromise is unlikely to be acceptable to other Democrats who are vigorously opposed to the Republican effort to accelerate reductions in income tax rates approved earlier this year as part of the sweeping $1.35-billion tax cut measure.

Senate Majority Leader Tom Daschle (D-S.D.) on Tuesday said that any speed-up of tax rate cuts would be unacceptable to most of his Democratic colleagues.

Bush plans to present his compromise to Daschle and other top congressional leaders at a White House meeting today.

Democrats offered compromises of their own Tuesday in the economic stimulus debate. But with partisan tensions and suspicions still running strong, it remains unclear whether the two sides can come together to pass a bill before they adjourn for the year.

Congressional negotiators have been struggling for weeks, without success, to bridge the differences between the two parties’ ideas on how to help pull the economy out of the recession.

House Republicans passed a bill in October that would provide $100 billion in tax breaks for businesses and individuals. But Senate Democratic leaders favor an alternative that provides less in business tax cuts and more in aid for unemployed workers.

The legislation has been on life support since negotiations collapsed late last week. Republicans accused Daschle of trying to stymie the bill and pin the blame for economic woes on the GOP.

Democrats, in turn, accused a key GOP negotiator--Rep. William M. Thomas (R-Bakersfield), chairman of the House Ways and Means Chairman--of sabotaging the talks by canceling weekend negotiations and going home to California.

House Majority Leader Dick Armey (R-Texas) on Monday began discussing plans for pushing a new, stripped-down bill that would be shorn of some of the Republican Party’s most controversial proposals, making it more politically difficult for Senate Democrats to block.

Treasury Secretary Paul H. O’Neill began talking to key senators Tuesday about the administration’s new compromise, which is similar to a plan drafted by the Senate’s centrist coalition in November.

The administration plan would:

* Speed up the reduction of the income tax rate in only one bracket, cutting the 27% rate to 25% in 2002, four years ahead of schedule. Bush had proposed accelerating rate reductions in all brackets.

* Scale back but not repeal the alternative minimum tax for corporations, which was enacted to ensure that all corporations pay at least some tax. That represents a retreat from a much-criticized House GOP proposal to repeal the corporate minimum tax for the future as well as provide rebates to corporations that paid the tax for the last 16 years.

* Provide a 13-week extension of unemployment benefits nationwide. Bush had proposed expanding benefits only in the states hardest hit by the economic downturn. Democrats also want to be sure that benefits go to part-time and recently hired workers who are not now covered.

* Provide additional subsidies for health insurance for the uninsured beyond the money Bush proposed for that purpose.

The compromise would provide a tax credit to help the unemployed cover the cost of continuing or obtaining health insurance.

Congressional sources estimated that the compromise would cost $93 billion in 2002.

Daschle showed a new willingness to compromise Tuesday when he said Democrats would go along with a more generous tax break to encourage businesses to invest in capital improvements, such as equipment.

Daschle said he would be willing to accept much of Armey’s stripped-down alternative--but with a significant reservation. He said he wanted to replace the plan to accelerate the income tax rate cuts with another plan, introduced by Sen. Pete V. Domenici (R-N.M.), to suspend for a month payroll taxes for Social Security and Medicare.

Republicans welcomed the movement by Daschle but insisted that some acceleration of rate cuts had to be included in a compromise bill.

Sen. Charles E. Grassley (R-Iowa) said some Republicans would “take to the floor to kill the bill” if it did not include rate cuts.