Bush Savors Senate Tax Cut and AIDS Bills; Hard Negotiations Await

Although President Bush once mocked the size of the Senate’s $350-billion, 11-year tax cut package as “itty-bitty,” administration officials Friday heaped praise on the measure for including a temporary repeal of dividend taxes and made clear they would push for a final bill with even more tax reductions.

Bush savored the Senate’s action late Thursday and in the early morning hours of Friday on two of his priorities: cutting taxes to help the economy and approving a $15-billion plan for international AIDS relief.

Speaking with reporters briefly Friday, Bush said the Senate tax bill “will make it more likely that people looking for work will find a job.”

The president also said the AIDS bill will “say to the world that the United States is a compassionate country.”

While the AIDS measure is on the verge of being sent to Bush for his signature, the tax legislation still faces plenty of challenges. Days, if not weeks, of hard negotiations lie ahead. In size and shape, the Senate bill differs substantially from a House package of $550 billion in tax cuts over 11 years.

For instance, the Senate bill would repeal the dividend tax temporarily -- and then resurrect it completely in 2007; the House bill would reduce it along with capital gains taxes for most of the next decade.

The Senate bill also contains tax increases, including one targeting Americans working abroad, to keep its total cost at the $350-billion figure Republican centrists have demanded. But these proposals are anathema to House Republican leaders.

Working in favor of a compromise is one-party rule in Washington: All the key negotiators will be Republicans. Democrats will play only a marginal role, at most, in developing the final bill. On Thursday, leading Senate Democrats were helpless to stop Republicans, with support from three breakaway Democrats, from passing the bill, 51 to 49.

Bush, who had criticized the size of the Senate bill in the weeks leading up to Thursday’s vote, laid out what mattered most to him as he left for Camp David.

“The tax cut must be strong and robust so people will be able to find work,” he said. “That’s what I’m focused on. I’m interested in jobs and job creation. And the more bold the tax relief package, the more likely it is a fellow American will be able to find work.”

Senate Finance Committee Chairman Charles E. Grassley (R-Iowa), who will head the Senate negotiation team, said any compromise must include fiscal aid to states. (The Senate bill grants states $20 billion; the House bill provides none.)

“Beyond that,” Grassley said, “I’d say everything’s on the table.”

He said negotiators agree on several provisions in the two bills -- such as accelerating to this year cuts in income tax rates now set to take effect in 2006. He added: “We’ll work though different points of view on dividend and capital gains tax cuts.”

House Ways and Means Committee Chairman Bill Thomas (R-Bakersfield), another key negotiator, was unavailable for comment and issued no public statement.

But two senior House Republicans told reporters that the Senate bill would provide a good starting point for talks.

“What has been cobbled together in the Senate is surprisingly good,” said Rep. Christopher Cox (R-Newport Beach), chairman of the House Republican Policy Committee. “We’re very sanguine about the prospects of getting an outstanding tax bill approved by the House and the Senate.”

Rep. Eric Cantor (R-Va.) said: “We’re all committed to getting as big a tax cut as we can out of the Congress.”

Administration officials embraced that goal.

“We’ve come a long way in the last 24 hours,” Commerce Secretary Don Evans said. “We were very encouraged by what came out of the Senate.”