Archive for Tuesday, September 11, 2001

GOP suggests tax cuts to stimulate economy

Lower capital gains rate may encourage stock sales, increase tax revenue

September 11, 2001

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— The Senate's top Republican suggested Monday that Congress consider coupling a reduction in the Social Security payroll tax with a cut in capital gains taxes to give the struggling economy a fresh infusion of cash.

"There are people, at the entry level, who are hit very hard by the payroll tax," Senate Minority Leader Trent Lott told reporters. "If you're trying to get money into working people's pockets quickly, that's one option you could consider."

President Bush left himself open to Lott's proposal Monday even as aides, speaking on the condition of anonymity, said he was in no hurry to commit to it or any other GOP economic stimulus initiatives. They said Bush was determined to wait and see whether his tax cuts would revive the economy, a process they conceded could take many days or weeks.

"The president is moving forward on his plan that promotes economic growth and protects Social Security, but he has not closed the door on other ideas," spokesman Scott McClellan said in Jacksonville, Fla., where Bush was promoting his education agenda.

In the House, Republicans pressed ahead with plans to draft legislation recommending automatic spending cuts to take effect in the new fiscal year in case the government winds up dipping into the Social Security trust fund this year.

The House Budget Committee arranged to meet today to consider the bill, which would cut spending across a range of domestic and defense programs. Benefit programs such as Social Security and Medicare would be excluded, officials said. Republicans said the measure was an attempt to reassure the public they intend to use the Social Security surplus exclusively to pay down the national debt, as they have promised to do repeatedly since 1999.

Democrats scoffed. "It's a gimmick. It's clearly an attempt to get around the fact that their budget director is bringing them really bad news, which is the tax cut has put them into spending the Social Security trust fund," said Kori Bernards, spokeswoman for House Democratic leader Dick Gephardt.

Republicans have been pushing to cut the capital gains tax, which now tops out at 20 percent, to 15 percent for two years as an economic stimulant and to boost government revenue as people sell investments. Many Democrats criticize that proposal as tilted toward the wealthy and worry about the long-term costs.

Sens. Phil Gramm, R-Tex., and Zell Miller, a conservative Democrat from Georgia, said they would introduce legislation today to cut the capital gains tax.

Rolling back a portion of the payroll tax that goes to Social Security and Medicare would give a tax cut to more than 30 million workers most earning less than $44,000 a year who were left out of this year's $40 billion in tax rebate checks because they didn't have enough taxable income to qualify.

Democrats stopped short Monday of embracing a cut in the 15.3 percent payroll tax, which is shared equally by workers and employers. But some Democrats agreed that any further tax relief be targeted at people who will not get a tax rebate check.

"It should be something that gets money into people's pockets quickly and it should to go those who were denied any assistance in the first round," said Senate Budget Committee Kent Conrad, D-N.D. "They would be the most likely to spend it."

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