Tax Bill:
Bush’s tax plan is undergoing heavy scrutiny, but early plans indicate he will get a good piece of what he asked for.
1) At least on taxes, President Bush seems to have learned his lesson: meeting Democrats half-way will not soften their attacks. Bush called for a larger tax cut than he originally planned, highlighted by the decision to entirely eliminate the double-taxation of dividends. Cash payments to state governments were eliminated at the eleventh hour.
Perhaps helpful in bringing into focus this fact about Democratic opposition was Sen. Edward Kennedy’s (D.-Mass.) attacks on Bush’s education bill, which the President had basically allowed Kennedy to write in 2001.
2) One point of disagreement lingers on the dividend-taxation question. The policy staffers in Treasury and the White House wanted the corporate end of dividend taxation eliminated. For the sake of fairness, simplification, and economics many in the Bush Administration wanted companies to be able to write off dividend payments entirely as they can with interest payments.
3) In the absence of a Treasury Secretary, Commerce Secretary Don Evans is the economic pointman for the White House. Evans is making the rounds of the political talkshows as well as meeting in private with groups around D.C. to sell the tax package. Evans is far more of a true believer than former Secretary of the Treasury Paul O’Neill, making him more effective than O’Neill (who said this week he would not have supported this plan).
4) One still-unanswered question: Would these tax breaks phase out in 2013 as the 2001 cuts are set to expire in 2011?
5) In Bush’s Budget, according to Evans, Bush will have general proposals addressing U.S. taxation of foreign income.
6) The conservative Republican Study Committee, as it did in 2001, is proposing a "Bush-Plus" tax cut that will include everything in the Bush plan plus AMT repeal, permanency of the 2001 cuts, and cut or elimination of cap gains, plus business expensing provisions.
7) House Majority Leader Tom DeLay (R.-Tex.) is adopting this tactic. Last week, he said that the Bush plan is a "floor, not a ceiling." The idea behind this is twofold: a) demonstrate congressional autonomy from the White House, and b) set a far right bookend to place Bush in the middle.
8) DeLay will have no trouble winning 218 votes to pass the plan in the House. Possible trouble there could come from Ways and Means Committee Chairman Bill Thomas (R.-Calif.). Thomas is famously stubborn, and there is some fear his tinkering with the bill could endanger it. Nevertheless, Thomas is determined to pass a bill.
9) On the Senate side, despite protestations from the liberal Republicans all but two GOP Senators, probably, will get behind the bill. Sens. John McCain (R.-Ariz.) and Lincoln Chafee (R.-R.I.)-the only two Republicans to vote against the 2001 cuts-will likely be alone again in opposing Bush when it comes down to a final vote. The objections of other liberal Republicans such as Sen. George Voinovich (R.-Ohio) and Olympia Snowe (R.-Me.) are expected to pass.
10) Sen. Zell Miller (D.-Ga.) is on board with the plan, which would give it 50 votes, enough to pass the bill with the Vice President’s tie-breaking vote. If the tax bill is folded into the budget resolution as planned, it cannot be filibustered, and 50 votes would suffice for passage.
Economic Policy:
With tax policy high on President Bush’s agenda, there is no principal economic spokesman to push the program.
1) Railroad executive John Snow was named for precisely that purpose, but his confirmation is now looming as a drawn-out process. Incoming Senate Finance Committee Chairman Charles Grassley (R.-Iowa) has launched an unprecedented review of corporate tax returns by Snow’s CSX railroad company, with company officials interviewed by committee aides.
2) However, a vacancy at Treasury is preferable to the departed Secretary O’Neill from the standpoint of selling the President’s tax program. O’Neill’s attack on Bush’s tax program underlines the wisdom of his abrupt departure.
3) Bush may have to find a new director of the Office of Management and Budget (OMB). Mitch Daniels is about to decide whether to run for governor of Indiana in 2004, and the guess is that he will decide to do it.
4) The President also is contemplating what to do about Federal Reserve Chairman Alan Greenspan. His latest four-year term as chairman expires in 2004. The real problem is that he is limited to one 14-year full term as a Fed governor, which ends in 2006. Would Bush name Greenspan to serve as chairman for just two more years? The guess is that he would, but must start thinking about a successor (if the President is re-elected).
