'Lots of Options' Being Explored in Tax Cut Negotiations
July 7, 2008 - 8:29 PM
(CNSNews.com) - In negotiations over the president's dividend tax cut, "We have lots of options on the table," GOP Assistant Majority Leader Don Nickles (Okla.) said on Thursday. "I don't want to exclude any or preclude anything."
The Senate Finance Committee, of which Maine's GOP holdout Olympia Snowe is a member, is in a huddle, with Republicans trying to negotiate upwards the $350 billion in tax cuts passed by the Senate this past month. The House passed $550 billion in cuts.
During the committee meeting, "The same hot issues came up: whether to accelerate the top rate cut, what kind of state fiscal relief to have and what to do about a dividend tax cut," said Jill Gerber, spokesperson for the Senate Finance Committee. "There were no surprises."
"My guess is that they will find a way to get to where the president wants to be on the dividend" tax, said Sen. Robert Bennett, who co-chairs the congressional Joint Economic Committee.
The Utah senator put the matter in perspective by noting that $350 billion "is considerably better than nothing." But more is better, he said. "The economic surveys we've done show that if you cut the dividend tax rate in half, you get more than half of the projected economic benefits.
"Obviously, you want all of the projected economic benefit, which means take it down to where the president wants it, which is zero," said Bennett. "If we can't, we'll take what we can get."
What the Senate gets may hinge on a new tax cut strategy put forward by House leaders, who on Wednesday okayed changes to the $550 billion tax cut.
Ways and Means Chairman Bill Thomas (R-Calif.) is pushing through a new strategic plan that uses tax cut phase-outs to make the overall tax cut seem, on paper, less costly to the federal coffers.
It would lower both the dividend tax (by 80 percent) and the capital gains tax paid by investors (from 20 to 15 percent). The Thomas plan would also give small business a bonus depreciation for new capital equipment of 50 percent, to help small manufacturers.
The Thomas plan, like the president's, would raise both the per-child tax credit to $1,000 and eliminate the marriage tax penalty but, unlike the Bush plan, only temporarily.
"No matter what we do, we're going to get a huge bang in stock market growth," said Dan Clifton of Americans for Tax Reform. "This is not a bad fight to be having, whether to be doing a dividend rate with capital gains or a dividend exclusion."
But Democrats and Senate Republicans on Thursday offered criticisms of the House strategy.
"Thomas' bill offers little to families," complained Rep. Charlie Rangel (N.Y.), ranking Ways and Means Democrat. "The so-called increase in the child credit is a hoax - like a magic trick, it's there and then it's gone again."
Senate Republican Conference Chairman Rick Santorum (Pa.) on Thursday said that a cut in the capital gains tax wouldn't help markets right now. "Everyone here...is in favor of lowering capital gains tax rates," said Santorum. But "there aren't a whole lot of capital gains in the market that are going to benefit from a reduction in capital gains tax rates."
Meanwhile, the House Republican Study Committee is fighting other proposals that would have a negative impact on the economy, such as increasing tax "rebates" for the poor and bailing out the states, as well as through "off-sets" - increasing other taxes by closing so-called tax shelters and imposing a double tax on the income of American workers working abroad.
The House Ways and Means Committee and the Senate Finance Committee have until May 8 to complete their work on the tax package before sending it to the floor for a vote. Then, the two bills will be sent to conference committee to iron out any differences.
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