Kennedy calls for delaying part of tax cut

Kennedy: tax cut was approved "in what now seems a very different and distant time."

WASHINGTON (CNN) -- U.S. Sen. Edward Kennedy, D-Massachusetts, on Wednesday proposed delaying part of the $1.35 trillion tax cut backed by President Bush and passed by Congress last year, saying it was approved "in what now seems a very different and distant time."

By calling for the deferral of $350 billion in scheduled tax reductions, Kennedy became the highest-ranking Democrat on Capitol Hill to make such a move. Other senior Democrats have questioned the tax cuts in recent weeks.

Senate Majority Leader Tom Daschle, D-South Dakota, had said the tax cut "probably" deepened the nation's economic recession but stopped short of calling for a delay or repeal. Similarly, Sen. Joseph Lieberman, D-Connecticut, has said that everything should be on the table, including consideration of a delay in the tax cut.

Kennedy noted that he and others had doubts about the tax cuts before the recession and the terrorist attacks on New York and Washington. With funds needed for defense, education reform, Social Security, prescription drug benefits for senior citizens, a patients' bill of rights and other priorities, he said, the tax cut has become too costly.

"The doubts that many of us had before the nation was attacked about the affordability of those tax cuts have become certainties in the wake of September 11," Kennedy said in a speech at the National Press Club.

The senator's speech marked the latest salvo in a growing debate over the economy as both parties gear up for November's midterm election, a crucial contest that could tip the balance of power in either the Republican-controlled House of Representatives or the Democratic-controlled Senate.

Bush laid down his position this month during a trip to California when he said a delay in cutting taxes would be tantamount to a tax increase. "Not over my dead body will they raise your taxes," he said at the time.

On Wednesday, Bush repeated his opposition.

"I think raising taxes in the midst of a recession is wrong economic policy. It'd be a huge mistake. It's bad for American workers. It'll hurt when it comes to creating jobs," Bush said. "And so I strongly disagree with those who want to raise taxes here in Washington, D.C. "

Kennedy, however, said the tax cuts he is proposing to push back would affect only the wealthiest of taxpayers. He noted the cuts are scheduled to take effect in 2004, by which time economists expect the recession will be history.

Most of the tax cut, Kennedy said, still would take effect, and everyone would enjoy lower tax rates in 2002 than in 2001. "No taxpayers would pay a higher tax rate than they pay now," he said.

The delay would not affect taxpayers who file jointly and make less than $130,000 a year, the senator said, adding that even those wealthier taxpayers who are affected will receive other tax breaks.

"Future additional tax breaks for the wealthy do not deserve a higher priority than strengthening education or covering prescription drugs under Medicare or protecting Social Security or meeting other urgent national priorities," Kennedy said.

Like other Democrats, Kennedy made sure to separate criticism of the tax cut and other domestic issues from Bush's response to the September 11 attacks and his handling of the war on terrorism.

Separating the two issues will be a sensitive issue for Democrats hoping to make gains on Capitol Hill in November, especially if Bush's approval ratings remain as high as they now are.

Yet taxes often can be sensitive election-year issues also.

White House Press Secretary Ari Fleischer predicted that Kennedy's proposal will be an unpalatable suggestion, even to many Democrats.

"A tax increase is a tax increase is a tax increase," he said. "It's wrong now, and it's wrong then in the president's opinion, and I dare say in the opinion of many Democrats."