House passes three tax cuts, prepares to debate a fourth
Bills would aid Gulf Coast, troops, and investors
WASHINGTON -- The House passed three tax cuts yesterday and plans to approve a fourth today, trimming the federal revenue by $94.5 billion over five years -- nearly double the budget savings that Republicans pushed through the House last month.
Republican leaders portray the tax bills -- for the hurricane-ravaged Gulf Coast, affluent investors, Iraqi combat troops, and taxpayers who otherwise would be hit by the alternative minimum tax -- as vital to keeping the economy rolling.
''Our economic policies have done the trick," said Representative Deborah Pryce, an Ohio Republican. ''We are in the middle of one of the strongest economies this country has ever seen."
Some budget analysts, however, say the flourish of tax cutting severely undermines the recent displays of fiscal discipline. Last month's budget-cutting bill would save $50 billion over five years by imposing new fees on Medicaid recipients, trimming the food stamp rolls, squeezing student lenders, and cutting federal child support enforcement.
''I don't think it makes any sense to go through all the difficulty they just went through with the budget-cutting bill, then give it all back in tax cuts," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget watchdog group. ''If they want to cut taxes, fine, but they are going to have to cut spending by at least that much to help the deficit, and clearly they are not willing to do that. They have to start looking reality in the face."
Under rules reserved for the least controversial bills, the House approved three tax bills yesterday in rapid succession. The first, at a cost of $31.2 billion, would slow the expansion of the alternative minimum tax, a parallel income tax system designed to prevent the rich from dodging taxation but that increasingly has ensnared the middle class.
The next, at a cost of $7.1 billion over five years, would provide an array of tax breaks to create President Bush's proposed Gulf Opportunity Zone in the region ravaged by hurricanes Katrina and Rita. Businesses could write off much of the cost of new structures and equipment, while Louisiana, Mississippi, and Alabama would be granted tax-exempt bond authority for their own rebuilding.
Bowing to pressure from Representative Frank Wolf, Republican of Virginia, and other social conservatives, GOP leaders exempted casinos, country clubs, hot tub facilities, liquor stores, massage parlors, golf courses, racetracks, and tanning salons from the tax breaks, exemptions the administration initially opposed.
Finally, the House passed a modest, $153 million tax break that would extend a provision allowing members of the military to use their combat pay to claim the earned income credit, among other tax measures.
The three measures passed overwhelmingly, with virtually all Democrats voting with Republicans and with hardly a mention of their impact on the deficit, which is projected to reach $331 billion in fiscal 2006 and remain above $300 billion a year through the end of the decade, when most of Bush's tax cuts are set to expire. The Senate has already passed similar measures, indicating that all the measures are likely to become law.
In a highly partisan atmosphere, tax cutting without regard to the growing federal debt appears to be one area that both parties can agree on, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. ''Everybody's losing credibility right now," she said.
Debate will be considerably more rancorous today, when the House votes on a $56 billion tax package, the centerpiece of which would extend the 2003 cuts on the tax rates on dividends and capital gains through 2010. Those provisions alone would cost the Treasury $20.6 billion through 2010 and nearly $51 billion through 2015, according to the congressional Joint Committee on Taxation.
Some moderate Republicans have expressed misgivings about those cuts, which overwhelmingly benefit affluent investors, especially as Congress moves to cut programs for the poor in the name of deficit reduction. But House GOP leaders expressed confidence yesterday that the tax cuts would pass, saying the cuts would add to the federal tax revenue by generating more economic growth.
''By cutting taxes, you grow the economy, and you generate an enhanced flow of revenues to the Treasury," said Representative David Dreier, a California Republican who chairs the House Rules Committee.