Daschle Proposes Business Tax Breaks as Part of Economic Plan

Two weeks after efforts to expand unemployment benefits and cut taxes collapsed on Capitol Hill, Senate Majority Leader Tom Daschle (D-S.D.) proposed new business tax breaks Thursday in a bid to take the offensive on economic issues in an election year.

Under Daschle’s plan, companies that hire more workers this year would be eligible for a “job creation tax credit.” And businesses would be able to claim a larger tax break for certain equipment--a one-year bonus meant to encourage new investment.

Daschle laid out his plan in advance of a speech he plans to deliver today at a Washington think tank. It is intended to serve as a Democratic counterpoint to President Bush’s State of the Union address later this month.

Daschle, a Democratic leader and a potential contender for his party’s 2004 presidential nomination, will use the speech to step up his attacks on the Bush-backed $1.35-trillion tax cut enacted last spring.

“At a time when we need to fight both a war and a recession, when our nation has urgent needs on all fronts, the tax cut has taken away our flexibility and left us with only two choices--both of them bad,” Daschle said in excerpts of his prepared text. “We can shortchange critical needs, such as strengthening homeland security, or we can raid the Social Security surplus and borrow money to pay for them. We cannot have it both ways.”

But Daschle stopped short of proposing a freeze or rollback of the tax cuts. Some Democratic strategists have warned him against staking out such politically risky positions as the party tries to defend--and expand--its slim Senate advantage in November’s elections.

On the tax cuts, Daschle essentially left the ball in Bush’s court. He urged the president to submit a budget request that would show the federal government is committed to fiscal discipline.

Calling for a “comprehensive plan for economic growth,” Daschle said that a disciplined federal budget would pay dividends by keeping down long-term interest rates. “In a real sense, low interest rates are the best possible tax cut,” Daschle said. “They help families afford college, buy cars, purchase homes and pay off credit card debt.”

Bush administration officials recently acknowledged that the government is heading for a period of budget deficits and have asked Congress to raise the federal debt ceiling. While many Democrats blame the tax cuts, administration officials attribute the budget crunch far more to the war on terrorism launched after the Sept. 11 terrorist attacks and to the national recession that began in March.

The Daschle plan also proposes substantial, but unspecified, increases in spending on domestic security; investments in education, job training and federally sponsored research; making broadband Internet access as universal as telephone service; and expanding benefits for farmers and others hit hard by competition from foreign imports.

Daschle reiterated his support for expanded presidential authority to negotiate trade agreements, words that will be welcomed by a White House pushing for Senate approval of that proposal.

But the White House will be less cheered by Daschle’s call for a “balanced national energy plan” that boosts production and conservation. Democrats routinely use that phrasing when criticizing Bush’s energy plan as too tilted toward production.

With his business tax proposals, Daschle sought to advance a debate on economic recovery that stalemated when Congress adjourned in late December. Republicans sharply criticized Daschle as an obstructionist who stood in the way of the Bush-backed economic stimulus bill.

Some of those Republicans were cool to Daschle’s new plan.

A spokesman for Senate Minority Leader Trent Lott (R-Miss.) called it a stealth vehicle for raising taxes. “America has now seen the Democratic-proposed spending spree,” said Ron Bonjean, “and we are now looking for the tax increase. . . . We know it’s inevitable from a Democratic-controlled Senate.”

But Sen. Charles E. Grassley (R-Iowa) termed it “a positive step” for Daschle to offer his plan. “Now the test for him is to show the kind of leadership needed to actually reach these goals in a closely divided Senate.”