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Archive for Sunday, May 20, 2001

Tax cut plan splits Democrats

May 20, 2001

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— When politicians talk about "wedge issues," they usually are referring to hot social controversies guns, school prayer, abortion and the like.

But this year, the biggest wedge issue Republicans have found to distract the Democrats is taxes. The Democrats are more deeply divided on President Bush's tax cut than on any other issue Congress faces.

In the House, where the plan was voted on in parts, as many as 58 Democrats defected to join the GOP. The effects in the Senate have been even more divisive. Tom Daschle of South Dakota, the Senate Democratic leader, usually has extraordinary success in keeping his caucus unified, even though he is dealing with big egos and widely varying viewpoints. But this tax cut has been more than even Daschle could defang.

His troubles began when Sen. Zell Miller of Georgia, a newcomer, popped out unexpectedly to co-sponsor with Texas Republican Sen. Phil Gramm an early version of the tax cut Bush had outlined in the campaign. Miller's defection in a 50-50 Senate caught Daschle flatfooted and signaled trouble ahead.

A larger problem emerged when Sen. Max Baucus of Montana, newly elevated to the ranking Democratic spot on the Senate Finance Committee, decided on his own to become the best buddy of the committee's new chairman, Iowa Republican Chuck Grassley.

Baucus phoned Grassley soon after the election and, over breakfast, suggested that they get together weekly to keep each other apprised of sentiments within their party caucuses, and that they try to draft the tax bill together.

Several factors served to facilitate cooperation. The Finance Committee has a tradition of bipartisanship. Grassley is an unpretentious, old-shoe politician, whose great strength is his straight-talk reputation. Baucus comes from a small-population state where politicians are not allowed to put on airs.

Political circumstances also impelled them to look across party lines. Baucus is running for re-election next year in Montana, which went strongly for Bush. Grassley's home state of Iowa voted twice for Clinton and then narrowly for Gore.

But the main motivation for both of them was a shared belief that if, as seemed certain, a big tax bill were to pass, it should reflect some of the elements important to both parties.

And that is what they have written a bill that returns $1.35 trillion of (hypothetically) surplus government revenues to the taxpayers over the next 11 years. Some Republicans wish the total were higher, closer to the $1.6 trillion over 10 years that Bush wanted, and they wish the marginal rate reductions were bigger cutting the top levy to 33 percent, as Bush proposed, rather than the 36 percent for which Grassley settled.

But bruised feelings among Republicans are modest compared with the screams of indignation from Daschle and many other Democrats at the deal that Baucus cut. Four of the 10 Finance Committee Democrats joined all 10 of its Republicans in endorsing the bill. But the other six and a clear majority of the Democratic caucus think that Baucus sold out the party.

The evidence is mixed. The liberal Center on Budget and Policy Priorities, in its analysis of the Grassley-Baucus bill, says it "would provide significant new assistance to low- and moderate-income working families. ... In this area, the proposal is a major improvement over both the House legislation and the administration's plan."

The richest Americans, this analysis says, will not do quite as well as they would under the Bush plan, but overall the benefits are still heavily tilted to the top fifth of the taxpayers. The net effect will be to increase the growing income gap between affluent Americans and the rest of the nation.

These effects are enough to repel most Democrats. And they remain troubled by the overall size of the package. Revenue projections 10 years out are risky, and the Bush budget assumptions about the costs of needed domestic and defense programs look unrealistic. Locking in a tax cut of these dimensions could be a huge gamble with the nation's fiscal future.

Baucus told me he too worries whether there will be enough money left to finance a prescription drug benefit for senior citizens. He's also uncomfortable with a complete phase-out of inheritance taxes, which will benefit only the wealthiest of Americans. But he has no sympathy for Democrats who oppose the measure. "It's been difficult for some of them to recognize that we are in the minority; we don't control the White House or the Senate or the House. So we have to do the best with what we've got."

As for the demonstration of Democratic disunity, Baucus said, "I don't think most people are worrying about the Democrats' position. They're looking forward to a tax cut."

But the wedge has been driven deep within the Democratic Party by this issue.



David Broder is a columnist for Washington Post Writers Group.

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