House plunges ahead with tax-relief bill

Daschle unveils the Democratic budget plan Thursday, saying if Republicans give it a look, "we think they'll like what they see."

By Ian Christopher McCaleb
CNN.com/AllPolitics Writer

WASHINGTON (CNN) -- If the Republican leaders of the House get their way, a large portion of President Bush's tax-relief plan may reach the chamber floor next week.

The first step was approval Thursday by the House Ways and Means Committee of a bill overhauling the tax-rate structure, per the president's request.

The tax-writing committee passed the Republican bill late Thursday afternoon by a vote of 23-15. Democrats voiced strong objections to the measure, which would implement an across-the-board cut in income tax rates over five years.

VIDEO CNN's Major Garrett reports on Bush's tour to gain support for his proposed budget Play video (QuickTime, Real or Windows Media) U.S. President George W. Bush explains his proposed budget to Congress (QuickTime, Real or Windows Media) Segment 1 Segment 2 Segment 3 Segment 4 Segment 5 Segment 6 Democrats Tom Daschle and Richard Gephardt respond to President Bush's budget proposal (QuickTime, Real or Windows Media) Part 1 Part 2     DOCUMENT President Bush's tax proposal Documents in PDF format require Adobe Acrobat Reader for viewing.     RESOURCE Whitehouse.gov: President Bush's budget blueprint     INTERACTIVE How will Bush's proposal affect your tax bracket? Compare: 2001 budget vs. Bush's proposed 2002 budget     IN-DEPTH CNNfn: Tax Time     MESSAGE BOARD Taxing and spending   YOU SAID IT From: Taxing and spending

The bill, the foundation of Bush's long-held tax-cut aspirations, would create a new lower 12 percent tax bracket and make it retroactive to January 1 of this year. It would also whittle the current five brackets to four -- representing 10, 15, 25 and 33 percent of an individual's earnings.

Bill Thomas, the California Republican who chairs the committee, praised the bill, saying it would benefit the nation's sagging economy and give Americans some extra money in their pockets.

But Democrats protested the bill's advancement, saying they had little time to prepare for the committee's debate, and did not understand why the Republicans would move this portion of Bush's plan forward, without working on Bush's pledge to phase out the marriage penalty of bring an end to the estate tax.

Republicans said they would return to those issues later.

The discord spilled over onto the House floor in the afternoon. Democratic Whip David Bonior of Michigan pressed House Majority Leader Dick Armey, R-Texas, about whether Democrats would be able to offer an alternative if the bill comes to the floor next week.

Armey said he could not predict what parameters the House Rules Committee would set for the debate. Bonior warned that any attempt to freeze the Democrats out of the process would quickly destroy the atmosphere of comity and partisanship the president has tried to create.

The congressional Democrats rolled out their own alternative proposals for tax cuts and national debt repayment Thursday morning, saying their plan was mindful that long-term surplus projections may not hold up.

The Democratic plan offers some sharp contrasts to the 207-page outline for the 2002 fiscal year budget the Bush administration sent to Capitol Hill on Wednesday, following the president's first speech to Congress on Tuesday night.

Senate Minority Leader Tom Daschle, D-South Dakota, said the plan contains "a hedge" against the possibility that estimates by the nonpartisan Congressional Budget Office that the government will control a surplus of $5.6 trillion by 2011 do not materialize.

That safety valve, Daschle said in a joint appearance with House Minority Leader Richard Gephardt, D-Missouri, requires a set-aside worth approximately one-third of the budget surplus for pressing priorities such as education, defense and an eventual prescription drug coverage regimen for Medicare beneficiaries.

"Our tax cut has to fit in within a responsible budget," Daschle said, pointing out that one-third of budget surplus would be dedicated to about $900 billion in tax cuts, in contrast to the president's proposed $1.6 trillion in cuts.

Another third of the surplus, the Democratic leaders said, would go toward an immediate reduction in the national debt, with the remaining third designated for education programs and the like.

"We hope our Republican colleagues will look at our plan," Daschle said. "If they do, we think they'll like what they see."

Bush's budget blueprint is a relatively light document compared to the encyclopedic budget proposal usually produced by the White House. Administration operatives say a full budget proposal will not be ready until sometime in April. By then, however, congressional debate will be well under way.

Bush's $1.96 trillion 2002 federal budget would set the government on a path toward directing the largest portion of the projected surplus -- $2.6 trillion drawn from Social Security -- toward paying off about $2 trillion in mature government debt, leaving the government about $1.2 trillion in the red by 2011.

Additionally, Bush would use $1.6 trillion for his tax cut, $842 billion for extra spending or debt reduction to be determined later; $417 billion for the added federal interest costs of tax cuts and spending; and $153 billion to overhaul Medicare, including a prescription drug benefit.

The Democratic plan differs from Bush's in that it includes an alteration of only one of the current five tax brackets, reducing the 15 percent bracket to 12 percent.

Gephardt argued that Bush's claim that a waitress earning $25,000 per year would see a significant reduction in her taxes under the Republican plan was misleading, because someone earning that sort of money pays mostly payroll taxes, rather than income taxes.

The Democratic plan, he said, expands the Earned Income Tax Credit to benefit people in that earning range.

"Forty-three percent of their tax benefits go to people earning an average of $900,000," Daschle said. "We want to provide a cut for families that pay only payroll taxes, who would not be helped under the president's plan."

Speaking on the second day of his post-speech budget tour, Bush told a North Little Rock, Arkansas, school assembly that the Democrats were intent on "targeting people in and targeting people out" of tax relief.

"If you pay taxes, you should get tax relief," he said. "I agree with my critics, however, that those on the bottom end should get the most help."

The president insisted his plan will help those people, and two of his surrogates, Budget Director Mitch Daniels and Treasury Secretary Paul O'Neill, appeared before the House and Senate Budget Committees respectively Thursday to drive that argument home to a closely divided legislative branch.

O'Neill in particular was pasted by Democratic members of the Senate committee skeptical about the Bush budget team's numbers, but he insisted that the $5.6 trillion surplus estimate was reliable.

Still, Democrats continued Thursday to caution their Republican counterparts not to rely on surplus estimates, saying that such long-range projections rarely hold true.

"The whole point of what we're saying today is be cautious, be conservative, be skeptical," Gephardt said.

Other Republicans accused the Democrats of doomsaying, adding they thought the congressional minority party has a problem with tax cuts.

"Working men and women have been patient for a long time, too long I'd say," said House Whip Tom DeLay, R-Texas. "But this year working men and women have a friend in the White House."

Reuters contributed to this report.

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