Lawmakers May Delay Tax Cut Debate

The House late Thursday night prepared to pass an unusual budget agreement that would postpone a decision about how big a tax cut to enact this year, after Republican leaders apparently quelled a rebellion among their rank-and-file that threatened to sink the deal.

The budget agreement leaves unresolved a festering split between conservative Republicans in the House, who want a tax cut as close as possible to the $725-billion plan President Bush proposed to boost the economy, and moderate Republicans in the Senate, who want to whittle the cut to $350 billion. The Senate moderates oppose the Bush plan because of their concerns about growing federal budget deficits and the costs of the military conflict with Iraq and postwar reconstruction.

The compromise budget resolution seeks to sidestep the dispute with an unprecedented provision that would allow the House and Senate to write bills with their own versions of the tax cut and resolve differences later.

The annual resolution is a nonbinding measure that sets targets for specific spending and tax cut bills that will be drafted later. Traditionally, the House and Senate agree on the same targets.

The compromise resolution would allow the Senate to authorize a tax cut of $350 billion, while the House could write a reduction of up to $550 billion. That would be far less than Bush and his conservative allies wanted. But House Republicans accepted it in exchange for a provision nullifying a controversial ruling issued Wednesday night by the Senate parliamentarian that undercut an earlier version of the two-track budget deal.

That ruling likely would have made it politically impossible to have a final House-Senate tax cut bill greater than $350 billion, a conclusion that infuriated House conservatives and led them to reject the deal floated by GOP leaders Wednesday.

GOP leaders worked most of Thursday to craft a new version that would overcome the parliamentary hurdle and appease House conservatives. Then they had to labor to pin down support from two moderate Senate Republicans who have refused to support a tax cut in excess of $350 billion -- Sens. George Voinovich of Ohio and Olympia J. Snowe of Maine, whose support will be crucial to passing the resolution in the narrowly divided Senate.

House debate began late Thursday night on the resolution, with a vote to follow. A Senate vote was scheduled for today.

Senate Budget Committee Chairman Don Nickles (R-Okla.) predicted the budget would pass but stopped short of claiming the votes needed to win were nailed down as of Thursday night. “We’ll have the votes” when the roll call occurs, he said.

Bush’s allies are hoping that support will grow over time for a bigger tax cut, as the final decision about its size is put off for a few weeks or months.

At stake in the arcane maneuvering was whether Bush would have any chance of salvaging the cornerstone of his economic growth initiative -- the $396-billion proposal to eliminate taxes on dividend income.

Republicans are eager to finish work on the budget resolution this week, before Congress leaves for a two-week spring recess. The pressure is on because Republicans last year relentlessly criticized Democratic leaders, who then controlled the Senate, for failing to produce a budget resolution.

Earlier this year, the House passed a resolution that embraced Bush’s $725-billion tax cut, while the Senate approved a resolution that would limit the reduction to $350 billion.

With Republicans now in control of the House and Senate, they had hoped to have a quick conference to resolve differences between budget resolutions passed by the two chambers. They resolved their differences on spending, but could not reach a compromise on their two tax-cut targets.