Posted on 11/16/2005 1:22:53 PM PST by Jean S
Finance Committee conservatives capitulated to the will of centrist Sen. Olympia Snowe (R-Maine) yesterday by supporting a package of tax cuts that does not include an extension of the 15 percent rate on income from dividends and capital gains.
But proponents vowed to fight to ensure those tax cuts will be restored to the package either on the floor of the Senate or in conference negotiations with the House, which was expected to mark up its version of the tax reconciliation legislation last night.
“This is just the first step in the process,” Sen. Mike Crapo (R-Idaho) said at yesterday’s mark-up.
Sen Jon Kyl (R-Ariz.) said he supported the revised package “for the sole purpose of getting it to the floor and eventually to conference.”
The clash over the rate on capital-gains and dividend taxes, which are not set to expire until 2008, is the latest in a long-running series of battles between GOP centrists and conservatives over tax policy. Even some conservative lawmakers had hinted shortly after Hurricane Katrina hit in August that the rate extensions could be delayed — though they have since said they support extensions.
Many centrists, including Snowe, are wary of cutting taxes amid cuts to spending on programs for the poor and mounting federal debt. Conservatives say that the lower tax rates on investors spur economic activity and that investors need to know what rates will be in the future. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) was forced to postpone his mark-up several times between Thursday and yesterday as conservative stalwarts on the committee worked to keep capital-gains and dividend rates in the legislation in some form and Snowe held firm.
Because of parliamentary obstacles, it is unlikely that the lower capital-gains and dividends rates could be inserted into the measure on the floor, according to several sources.Snowe, a leading Republican critic of recent deficits, said all along that she would oppose a tax-reconciliation measure that extended the tax cuts for investors. Her vote is critical to GOP tax bills because Republicans hold an 11-9 advantage on the Finance Committee.
“It’s not a question of whether or not we support tax cuts; it really is a question of what we can afford now,” Snowe said. She added that lawmakers should not continue to play a “fiscal shell game” of promoting tax cuts that expire, or “sunset,” and must be extended within a few years of enactment.
Grassley’s mark nets $60 billion in tax cuts over five years, including a one-year “fix” for the alternative minimum tax, disaster relief and the extension of a series of other tax breaks due to expire soon. The measure also includes provisions aimed at increasing charitable giving.
It is a companion measure to the $35 billion spending-cut bill the Senate passed last week. The budget resolution adopted in April paved the way for three separate “reconciliation” bills — $35 billion in spending cuts, up to $70 billion in tax cuts and a debt-limit increase — to be considered on the Senate floor under expedited procedures.
Snowe voted for the budget, but, noting Hurricane Katrina and other emergencies, said the world has changed since then. She voted against the spending cuts.
Panel Democrats, who had lined up in unanimous opposition to extending the capital-gains and dividend rates, praised Grassley’s decision to strike them in his final package.
“From this side of the dais, it is a welcome change,” said the committee’s ranking Democrat, Max Baucus (Mont.). He urged Grassley to “defend this position … as aggressively and strenuously as you can.”
Conservatives took Snowe’s stand — and the ensuing behind-the-scenes wrangling — in stride.
“It’s the nature of the process when you have a one-vote margin,” said Sen. John Sununu (R-N.H.).
Daniel Clifton, the chief economist at the anti-tax Americans for Tax Reform, expressed confidence that revised legislation including the capital-gains and dividend tax cuts could eventually be approved by the upper chamber. “My head count suggests that we have 52 votes on the Senate floor,” Clifton said, acknowledging that at least a few Republicans would be likely to defect.
Majority Leader Bill Frist (R-Tenn.), who sits on the Finance Committee, wrote an op-ed column in The Washington Times yesterday advocating a full repeal of the taxes on investment income.
“By seizing a portion of the money that investors make when a company increases in value or hands out cash, these taxes place a tremendous burden on those who put aside money for the future,” he wrote.
Frist, widely considered to be in the early stages of a 2008 presidential campaign, sent the opinion piece to political supporters in an e-mail that hit inboxes as the Finance Committee was approving the package without those cuts.
Sen. Trent Lott (R-Miss.) noted the division on the package in his opening remarks at the mark-up yesterday. It is clear that a measure is ready to be reported, he said, when it is almost as bad as it is good.
“We’ve achieved that position now,” he said to laughter.
I figured that even if Republicans tend not to have actual guiding principles, at least they associate themselves with some nice ideas, like lower taxes. Looks like even that can't be counted on anymore.
Well, if that's what you want. One favor though, would you mind standing directly in front of Snowe?
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