House votes income tax Bill

By Sridhar Krishnaswami

WASHINGTON, MARCH 9. In what has been seen as the first major victory for the U.S. President, Mr. George W Bush, on Capitol Hill, the House of Representatives voted 230 to 198 to cut income taxes by almost $1 trillion over the next 10 years. The Bill, which is the main component of Mr. Bush's US $1.6 trillion tax package plan, had the backing of all the Republicans in the House with 10 Democrats joining them.

``It's a win and I can't thank you all enough,'' Mr. Bush told Republican leaders over the phone from North Dakota. ``I am glad we moved the way we did. It's great leadership,'' he told Mr. Dennis Hastert, Speaker of the House, and other leaders. All day long, Republicans in the House made the point that the surplus belonged not to the Government but to the people.

Under the Bill, the present five graduated rates of income tax will be brought down to four by 2006; but to provide immediate relief the legislation has created an interim 12 per cent bracket retroactive to January 1, 2001. Over the next several weeks, House Republicans are expected to move on to other aspects of the tax relief package such as getting rid of the so- called marriage penalty, estate tax relief or repeal and a child tax credit.

The Democrats had an alternative income tax plan that called for a $586 billion in cuts over a 10-year period and at the same time providing more money for national debt reduction. The plan was rejected by a vote of 273 to 155. While no Republican voted for the Democratic alternative, 53 Democrats opposed the idea. Moderate Democrats and the ones from Conservative states and districts said they were willing to support higher tax cuts provided there was money for other priorities.

The main objection of the Democrats was that the tax cut plan was so big that it complicated efforts to pay down the national debt and jeopardised programmes such as Medicare and Social Security. And the Democrats' biggest complaint was that the Republicans were giving better breaks to higher income groups. ``If we're going to deliver tax relief, let's deliver it to the people who need it,'' said the Minority Leader, Mr. Richard Gephardt.

The passage of the Bill is perhaps the first major step in what is most certainly a very difficult road ahead. The Republicans may have been too eager to get the legislation passed soon enough, but it is a totally different ballgame in the Senate. In the first place the rules are different; and secondly the Republicans and the Democrats are tied 50-50 with the Vice- President to cast the tie breaking vote.

Timing-wise, the Senate is not expected to get to the tax proposals till May, or perhaps even later. But there are many things that the Bush White House will have to keep in mind.

Republican Senators are not all united behind their President's tax cut plan. Four Senators belonging to the Grand Old Party have expressed open scepticism and along with five Democratic colleagues are proposing a ``trigger'' mechanism in the tax legislation which would lower the rate for a particular year if the surplus did not come up to expected levels. Expectedly, the White House is not in favour of this idea.

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