Stalemate over tax cut extension

0 Comments | Oakland Tribune, Jul 22, 2004 | by David Espo

WASHINGTON -- The Bush administration and Republican-controlled Congress deadlocked over tax-cut legislation on Wed-

nesday, but a White House concession breathed new life into a separate election-year issue, a long-stalled highway bill.

Several Republican officials said the White House rejected as insufficient an offer by GOP leaders for a two-year extension of expiring tax cuts for parents, married couples and workers.

Bush, in the midst of a difficult re-election campaign, wants a five-year extension of the tax cuts, which are scheduled to expire on Dec. 31.

"It would be nice to do it now, but if it's not just the right package, I'll wait and do it later," said Senate Majority Leader Bill Frist, R-Tenn.

White House and congressional aides predicted an effort to revive the tax cut measure in the fall.

Many conservative lawmakers prefer a five-year extension, hoping not only for the economic benefit but also for the political boost on an issue that favors the GOP.

Frist and House Speaker Dennis Hastert, R-Ill. agreed late Tuesday on the two-year extension instead, a compromise designed to gain the support of Senate GOP moderates who fear the bill's impact on record deficits.

On the highway bill, GOP sources said the White House had indicated it could accept a measure of just under $284 billion for six years.

That's nearly $30 billion higher than Bush initially said he would accept but far below the level of a Senate-passed measure.

One GOP aide, who spoke on condition of anonymity, said that under the proposal, Congress would rescind several billion dollars of highway money it approved in previous years but that has yet to be spent.

Together, the two measures underscore the difficulty confronting Republicans as they attempt to enact legislation that exposes conflicting priorities within their own ranks.

The House and Senate have yet to agree on an overall budget for the year. That impasse results in large measure from internal GOP disagreement over the wisdom of additional large tax cuts in an era of record deficits.

Democrats have sought to turn such disputes to their political advantage.

"The American public is seeing a Congress that is dysfunctional," said House Democratic Whip Steny Hoyer, D-Md.

Earlier in the day, Frist said he'd like to see the tax cuts extended more than two years, perhaps permanently.

"Is that asking too much at this juncture?" he said. "I don't think so, but I've got a lot of people to consider."

That was a reference to moderate Senate Republicans as well as Democrats who said they wanted a shorter-term bill.

"Our members are hungry for something that will pass," said Stuart Roy, spokesman for House Majority Leader Tom DeLay, R-Texas. "They want to get something that prevents the tax increase."

"I think the two-year deal ought to fly," said Rep. Paul Ryan, R- Wis.

Under current law, a child tax credit now pegged at $1,000 would revert to $700 on Jan. 1, 2005. Also, a portion of income currently taxed at 10 percent would face a levy of 15 percent. Additionally, some couples would be hit by a so-called marriage penalty that Congress eased last year.

Failure to enact an extension would also expose more taxpayers to the alternative minimum tax. Originally designed to prevent wealthy individuals from avoiding taxes, the AMT now falls on an increasing number of middle class families.

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Associated Press writer Jim Abrams contributed to this story.