That action in turn is fueling Republican optimism about turning the tables on Democrats, who are pulling in the opposite direction to make the Bush tax cuts smaller, not larger.
In the tax season just past, many middle-income Americans gasped when they had to pay capital gains taxes for the first time. The alternative minimum tax, originally sold as a means of making sure "the rich" pay their "fair share," is also beginning to reach down into the tax bills of Middle America.
With about half of America's taxpayers invested in stocks, bonds, 401(k) plans and other retirement portfolios, Democrats are discovering that the old line of "tax cuts for the rich" is starting to wear thin. Middle-class America is not amused. It is a quiet anger the media are ignoring while beating the drums for bigger government.
Republicans and Democrats are joining hands on the Senate side to include capital gains tax cuts as part of an $85 million stimulus package.
In the House, Majority Whip Tom DeLay, long regarded as the congressional leadership's conservative conscience when the GOP troops start to wobble on party principle, talks openly about the "real" tax-cut bill that will be ironed out in a conference committee aimed at reconciling differences between House and Senate versions.
Right now, the emphasis is on a compromise between President Bush's $1.6 trillion cut and the $1.2 billion allowed in the Senate budget. The president himself has been talking one-on-one to Democratic senators to try to get that figure back up as close to his original proposal as possible.
But the concern among congressional Republicans is not so much the total figure as the timing of when the tax package kicks in. Most of it is backloaded and won't be realized until after 2005 or 2006.
"By that time," grumbled a GOP aide, "Hillary could be in the White House just in time to take credit for the good times that will start rolling, thanks to the Bush tax cut that she is now trashing every day."
It doesn't take rocket science to understand that the tax package needs to be frontloaded if it's going to do Bush's administration any practical political good. A recession, of course, plays into the Democrats' hands. More than one Republican thinks that's precisely why the left-wing lawmakers want to stall the tax cut, just so they can have a recession to blame Bush for in the 2004 campaign. That sounds cynical, but in politics you don’t assume that the highest motivations play the biggest role in high-stakes decisions.
It is this political need to get tax cuts into people's hands right now, coupled with the middle-class outrage mentioned above, that is working toward a tax package that could ultimately be better, not worse, than what the president originally proposed, even if he has to go halfway between $1.6 trillion and the Senate’s $1.2 trillion figure in the main package.
There is yet another factor playing in the Republicans' drive for lower taxes. A new 1,300-page congressional report recommends eliminating or streamlining dozens of taxes. One of those targeted for elimination by the Joint Committee on Taxation is the alternative minimum tax. This tax, according to the report, "no longer serves the purpose for which it was intended" and increasingly threatens the middle class. When this tax was adopted, it was never indexed for inflation.
Senate Majority Leader Trent Lott is working both sides of the aisle for capital gains cuts. Among the Democratic senators reportedly considering voting for capital gains tax cuts are Max Baucus, D-Mont., facing a tough re-election battle next year in a state that clobbered Al Gore in last year's voting; Robert Torricelli, D-N.J., who is in political hot water because of an investigation involving his last Senate campaign; and John Breaux, D-La., who was always seen as a liaison between the parties on this and other issues.
Tax-day sticker shock may be a bonanza to tax-cutting Republicans. When the "real bill" is formulated in the conference of House and Senate lawmakers, that sticker shock may result in a better package than anyone thought possible just a couple of months ago. More frontloading and capital gains cuts are the two possibilities in those pivotal negotiations.
The GOP has to balance things so as not to overplay its hand either. The main political target is to see to it that Bush comes out looking like a winner on this signature issue, which could affect the rest of his administration. Remember, President Ronald Reagan did not get everything he asked for in his 1981 tax cuts. And while there is a rising middle-class anger on taxes, this is still not 1980 or 1994.
Getting the biggest cut for the available votes is what it's all about. If everything is not included this year, there's always next year, when the lawmakers are closer to re-election time.
"Remember this," Majority Whip DeLay told NewsMax.com. "We [the House] have passed a tax cut every year we [the Republicans] have been in the majority. And we'll pass a tax cut every year we remain in the majority."
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