House Votes to Permanently Keep Tax Cuts

A divided House on Thursday renewed last year’s battle over President Bush’s 10-year tax cut plan, as Republican leaders pushed through a bill that would make the law permanent.

The measure, approved on a 229-to-198 vote that closely tracked party lines, would drop the current Dec. 31, 2010, expiration date for the $1.35-trillion package of tax cuts.

But the bill is expected to stall in the Senate, where Majority Leader Tom Daschle (D-S.D.) has said he will not bring it to a vote.

Bush quickly praised the House’s action and sought to apply pressure on the Senate. “Taxpayers need to know they can count on continued lower tax rates as they plan and invest for the future. I urge the Senate to act on this measure, because failure to do so would penalize every American who pays federal income taxes.”

Thursday’s House debate was marked by rhetoric likely to echo throughout this year’s congressional campaigns.

Republicans sought to portray Democrats as obstacles to the agenda of a popular president and said opposition to making the tax cut permanent was tantamount to supporting an enormous tax increase.

“If we don’t take this action, in 10 years we will see the largest tax increase in our nation’s history,” said Rep. David Dreier (R-San Dimas).

Democrats responded that extending the tax cut would threaten the Social Security system because federal revenue would be drained just as large numbers of baby boomers begin to retire.

House Minority Leader Richard A. Gephardt (D-Mo.) called Thursday’s roll call “the definitive vote in this Congress on the future stability and security of Social Security.”

The bill returned the spotlight to Bush’s biggest legislative achievement but under circumstances vastly different from when the tax cut was enacted last spring. At that time, the federal budget was awash in surplus revenue, the economy was beginning to stall and New York’s World Trade Center was still standing. Now the budget is running a deficit, the economy is struggling to emerge from a recession and the government is spending billions in response to the Sept. 11 terrorist attacks.

While leading Democrats argue that those changes call for caution about extending the tax cut, they have been wary of proposing a repeal or rollback of any part of the current law.

The law provided most taxpayers with rebates ranging from $300 to $600 last year, but many of its cuts will take effect gradually in the next few years and then abruptly end. These provisions include reductions of income tax rates, a doubling of the $500-per-child tax credit for families, a new tax deduction for college tuition and repeal of the estate tax.

The law’s sunset provision was included for accounting and political reasons. Without it, the cost would have exceeded the $1.35-trillion target negotiators had set and, because of congressional budget rules, would have required 60 votes to pass in the 100-member Senate. It ultimately passed, 58 to 33.

Because some elements phase out before 2010, congressional analysts say that making the tax cut permanent would cost about $373 billion from 2002 to 2012. No official cost estimate is available for the following 10 years, but Democratic analysts predicted that extending the tax cut would drain about $4 trillion in revenue from 2013 to 2023.

Some Democrats who supported the Bush tax cut last year say tighter budgetary circumstances now give them pause. Although 28 House Democrats voted for the tax cut last year, only nine voted Thursday to make it permanent.

Rep. Mike Ross (D-Ark.) said: “This is a vote that should happen in 10 years. But not now, unless we can demonstrate the money will not come from raiding the Social Security trust fund.”

Republicans said the bill would not harm the Social Security program and accused Democrats of demagoguery for raising the issue.

Addressing himself to taxpayers, Rep. William M. Thomas (R-Bakersfield) said: “What they are using is scare tactics . . . to make sure you don’t get some of your hard-earned dollars.”

The California delegation split along party lines with one exception: Gary A. Condit (D-Ceres) voted for the bill.

The issue may come before the Senate, despite the opposition of Daschle and other top Democrats. Senate Republicans tried to force a vote Thursday on making repeal of the estate tax permanent.

The effort was deflected with a procedural move, but Republicans pledge to keep trying.