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Senate Spurns House Plan To Cut Taxes Presidential Politics Enter Budget Debate

Wed., May 24, 1995, midnight

Senate Republicans put themselves on a collision course with their House colleagues Tuesday when they refused to amend their budget bill to include big tax cuts and more military spending.

By a lopsided 69-31 margin, the Senate rejected a bid by Texas Republican Phil Gramm to stitch the main provisions of the House tax cut into the Senate budget plan.

Senators from both parties said their first priority should be balancing the budget, not providing tax breaks.

Afterward, Senate Republican leaders met privately to determine whether a more modest tax cut could be included in the budget plan before a final vote on the package today.

The Senate also rejected, 60-40, a bid to increase defense spending beyond what President Clinton has recommended over the next seven years. The House bill would add about $68 billion to Clinton’s defense budget over that period.

Presidential politics were apparent in the Senate deliberations on tax cuts.

Gramm, bidding to solidify his appeal to the party’s most conservative anti-tax activists, pressed hard for a slightly modified version of the House tax cut plan. Gramm’s proposal would have cut taxes by $312 billion over seven years compared with about $350 billion in the House measure.

While Senate Majority Leader Bob Dole, the frontrunner for the GOP nomination, voted for Gramm’s amendment, Senate aides said he sided privately with moderate party elements - led by Budget Committee chairman Pete V. Domenici, R-N.M. - who felt that tax cuts should take a back seat to spending cuts meant to balance the budget.

On the tax cut vote, 23 Republicans joined all 46 Senate Democrats in voting against Gramm.

The Senate budget would cut back projected spending by nearly $1 trillion over the seven years, promising to balance the budget by 2002.

In addition to deep cuts in scores of domestic programs, it would sharply slow the growth of Medicare and Medicaid, the government health insurance programs for the elderly and poor.

After Senate passage of the plan, differences between it and the House-passed version will have to be worked out by negotiators from the two chambers.

Before the defeat of Gramm’s amendment, Democrats charged that it amounted to a stiff tax hike on the working poor to pay for a generous tax cut for the well-to-do.

“Families earning less than $28,000 a year will have to pay more taxes under this amendment,” said Sen. Carl Levin, D-Mich., “while people earning more than $100,000 will get a big tax cut.”

Gramm argued that the benefits of the tax cut for businesses and upper-income taxpayers would be translated into investments in job-creating enterprises and therefore boost the larger economy.

“No poor person ever hired me in my life,” Gramm said. “If we want people to create jobs, we’ve got to create the incentives for them to do it.”

Under the Gramm plan, individual and corporate investors would have received a cut in capital gains tax rates. His proposal also would have granted a $500-per-child tax credit to families earning up to $200,000 a year.

“Under my amendment,” he said, “families would do more spending and the government would do less. Businesses would invest more money in the economy and the government less.”

Before rejecting the Gramm amendment, senators also turned down a proposal by Sen. Bill Bradley, D-N.J., that would have nullified a provision in the GOP’s budget package to slash the earned income tax credit by $20 billion for low-income working families. Bradley’s amendment would have restored nearly $17 billion.

“You hear a lot of talk here about Republican tax cuts,” Bradley said. “What you don’t hear about is a whopping tax increase on millions of poor working families if these EITC cuts go through. … This money is not used for fancy dinners or limo rides. It’s the rent money, it’s clothes for the kids, it’s to pay the utilities.”

MEMO: Cut in the Spokane edition.

Cut in the Spokane edition.

Tags: Congress

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