Democrat Puts Up $70-Billion Tax Cut Plan

A top Senate Democrat on Tuesday proposed a $70-billion package of tax cuts and spending increases to stimulate the economy, the first detailed Senate Democratic proposal in an economic policy debate that so far has been dominated by Republican tax-cutting plans.

The proposal, by Senate Finance Committee Chairman Max Baucus of Montana, includes one-year plans to increase spending by $35 billion in 2002, mostly to help unemployed workers, and $35 billion in temporary tax cuts for businesses and individuals.

That’s markedly different from the Republican-backed bill the House is expected to approve today, which provides $100 billion in 2002 stimulus measures--almost entirely in tax cuts--and makes many permanent changes in the tax code. The House bill is also far more oriented to business as opposed to individual tax cuts.

Baucus is one of several Democratic committee chairmen planning to contribute to their party’s anti-recession alternative, which is expected to move through the Senate in the coming weeks. He is especially influential because his committee has jurisdiction over the tax cuts and unemployment benefits that are expected to be central to any economic package.

Despite the divisions between House Republicans and Senate Democrats, there are some common components that point to core provisions likely to be included in any bill that clears Congress:

* Tax refunds for workers who did not benefit from the rebate checks issued earlier this year under President Bush’s $1.3-trillion tax cut.

* Tax breaks for business in the form of quicker write-offs for the cost of certain expenses, to give companies new incentives to invest in plants and equipment.

* Help for ailing companies by more generous write-offs for current-year losses.

Beyond those consensus items, the partisan divide is broad. The House bill includes a cut in capital-gains taxes, repeal of the corporate alternative minimum tax and an acceleration of the income tax cuts that were approved earlier this year. Baucus includes none of those but provides an expansion of unemployment benefits and health insurance subsidies for the jobless.

The contrasting proposals set the limits of a policy debate that will play out over the coming week or two: Whether the sagging economy is better bolstered by increased spending or tax cuts, or some combination of the two.

“We are really seeing two competing schools of economic thought battling for supremacy,” said Steve Moore, head of the Club for Growth, a conservative group pushing for bigger tax cuts.

Democrats See GOP Power Play

The House is scheduled to vote today on its $100-billion tax cut bill, which was approved on a party-line vote by the Ways and Means Committee. Democrats complained that, despite calls for bipartisanship from congressional leaders and the president, committee Republicans were muscling through a bill that provides too big a tax cut for corporations and too little benefit for lower-income and unemployed workers. Democrats plan to offer an alternative similar to Baucus’.

Douglas Hattaway, a spokesman for Senate Majority Leader Tom Daschle (D-S.D.), said Baucus’ proposal is a “first step” toward crafting a comprehensive Democratic alternative.

Although Baucus’ proposal reflects a consensus shared by many Democrats in the Senate, some of his colleagues are pushing for additional stimulus measures.

Sen. Edward M. Kennedy (D-Mass.), chairman of the Health, Education, Labor and Pensions Committee, is pushing for more generous health insurance subsidies for the unemployed. Senate Appropriations Committee Chairman Robert C. Byrd (D-W.Va.) Tuesday proposed including in the economic stimulus package $20 billion in new spending for homeland security measures, including increased security for transportation and nuclear and health facilities.

“We can provide a stimulus for the economy [and] at the same time provide homeland security,” Byrd said.

On the other hand, Baucus and others say that, unlike the House bill, the Senate measure will have to be bipartisan to pass the narrowly divided chamber. Baucus will continue to negotiate with the ranking Republican on the Finance Committee, Charles E. Grassley of Iowa, who said Tuesday that he wants the legislation to include more tax cuts to encourage business investment.

Baucus’ main provision for individual taxpayers is the refund of up to $600 for those who did not benefit from last summer’s tax rebate, which went only to taxpayers. Most of the beneficiaries would be lower-income people who paid Social Security and Medicare payroll taxes but not income taxes.

To help unemployed workers, Baucus proposed that the government provide 13 weeks of additional benefits, to pay half of the cost of continuing health insurance coverage and to allow more jobless people to qualify for Medicaid.