By
The Associated Press
WASHINGTON - Senate Republicans are struggling to preserve President Bush's paramount income tax cuts while still squeezing in priorities such as estate tax repeal and marriage penalty relief.
Senate Majority Leader Trent Lott, R-Miss., told reporters yesterday that if budget negotiations produce a tax cut ceiling below $1.3 trillion over 10 years, "you've got a problem with achieving the things that the Congress and the American people support overwhelmingly."
"We may have to ... then look at what would be pulled out," Lott said.
The House backed Bush's full $1.6 trillion tax cut in its budget plan, but the Senate approved only $1.2 trillion in its version. The compromise number, expected to emerge this week, is likely to fall between $1.2 trillion and $1.4 trillion, not counting an additional tax rebate for this year of between $60 billion and $85 billion.
Republican members of the Senate Finance Committee met privately last week to begin looking at how to fit Bush's four main tax cuts under a lower figure. The priorities, all passed by the House at a cost of just over $1.5 trillion combined, are across-the-board income tax cuts; relief from the marriage penalty paid by millions of two-income couples; doubling of the $500 child credit; and abolition of the estate tax by 2011.
"You have to think of every provision being negotiable," said Finance Committee Chairman Charles Grassley, R-Iowa.
One option being discussed is cutting the top two income tax rates - now 36 percent and 39.6 percent - to 35 percent, instead of dropping them to a 33 percent rate as Bush wants. That would save money and temper Democratic arguments that the president's rate cuts are too generous to the rich, but GOP conservatives would strongly object.
Another option would be leaving some tax cuts until later, with estate tax repeal the leading candidate. Grassley said yesterday that the law intended to gradually abolish the tax will itself expire after 10 years - meaning the estate tax would then return in full force.
"I prefer the elimination of it and I don't consider what the House passed an elimination," Grassley said.
Yet a freestanding estate tax bill would be subject to all manner of amendments and would require 60 Senate votes to overcome blocking tactics. Many Democrats want to keep the estate tax for the wealthiest heirs but immediately raise exemptions from $675,000 to $2 million per individual, helping farmers and small businesses avoid it.
"We can do better than the House-passed bill," said Sen. Kent Conrad, D-N.D.
To further complicate matters, the House this week is poised to pass a 10-year, $52 billion bill to raise contribution limits to individual retirement accounts and 401(k) plans and enact dozens of other pension law changes. A similar bill is pending in the Senate, and Grassley said it could be added to the main tax package.
Bush has proposed other tax cuts for education, health care and business that are not part of the main discussions. Grassley said some business-related tax cuts could be attached to a measure raising the minimum wage, and other items could be attached to yet another bill extending several tax provisions that expire at the end of this year.
Lott repeated that he and other conservatives want a cut in capital gains taxes to spur investment.
"I'll be looking for an opportunity to advance that," Lott said.
Grassley said he hopes to develop a compromise on the major tax package with Sen. Max Baucus of Montana, the ranking Democrat on the Finance Committee, by next week. A Baucus spokesman said yesterday that a joint bill was possible if it adhered to budget limits and treated lower-income and rural people fairly.
