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Bush Begins Sales Pitch; Democrats Worry Bush Tax Cut May Jeopardize Federal Surplus

Aired February 5, 2001 - 2:04 p.m. ET


JOIE CHEN, CNN ANCHOR: Now on to today's presidential sales pitch. It's all about money; your money, that is. Tax cut plan that Mr. Bush says will help middle class families. Skeptics, though, are concerned that it's more likely to benefit the wealthy. The president hopes the public will see it his way, taking his plan directly to the people, before he presents it to Congress.

A closer look now at the plan and the president's full-court press with our senior white house correspondent John King -- John.

JOHN KING, CNN CORRESPONDENT: Well, Joie, the president began his tax-cut push today. And as you mentioned, he will spend next several days, flushing out various aspects of the plan. He will send it up to the Congress on Thursday.

Remember, this was the signature proposal of the Bush-for- president campaign. At that time, public opinion polls showed most Americans didn't think so much of tax cuts as a big priority. But the president believes he has the momentum now, because of new figures showing a growing federal budget surplus and other figures showing a slowing economy


KING (voice-over): A focus on families as the president opened the fight for his big tax cut plan.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This is my approach: tax relief for everybody in every bracket, averaging $1,600 per family, while still reducing our national debt and funding important priorities.

KING: The White House says the 10-year price tag of the president's plan is $1.6 trillion. Democratic leaders back cutting taxes by half that, $850 billion. Mr. Bush disputed Democratic arguments that his plan is tilted to favor the rich, saying it is only fair that those who pay the most in taxes get a generous tax cut.

But he also had strong words for fellow Republicans who think the tax cut should be even bigger.

BUSH: Some in Congress view this as an opportunity to load up the tax relief plan with their own vision of tax relief, and I want the members of Congress and the American people to hear loud and clear this is the right-sized plan, it is the right approach, and I'm going to defend it mightily.

KING: The driving force of the Bush plan is an across-the-board rate cut. There are now five federal income tax brackets: 15 percent, 28 percent, 31 percent, 36 percent and 39.6 percent. Mr. Bush proposes four lower rates: 10, 15, 25 and 33 percent.

UNIDENTIFIED MALE: Well, the beneficiaries of the plan are very clear: rich people. Almost 40, 50 percent of the cut goes to the top one percent of the country. They get an average tax cut of about $50,000 each.


KING: Now, the Bush team obviously disputes that. Again, they make the case that those who pay the most should get the most back when the governments cut taxes.

But the president making the case with several families on hand today, that in his view, those in the lower- and middle-income groups will benefit the most from this.

In addition to the across-the-board rate cute, he also wants to eliminate or shapely reduce the so-called "marriage penalty," eliminate estate and death taxes.

This debate, of course, will go to the Congress now. Everyone in Washington believes there will be a big tax cut this year. The question now is just how big -- Joie.

CHEN: John, I know there are details to be worked out. But explain to us a little bit about how this is supposed to work. I mean, even if they get this passed, say, by midyear this year, is this going apply to my taxes for this year? Or is it going to be retroactive? Or would it be next year? Or where am I actually going to see this? Am I going to see it in my paycheck, or is it in my tax return?

KING: You might see it in your paycheck by the middle of the year. The initial Bush plan, the one he will actually propose to Congress on Thursday, is not retroactive.

But the president has already said he wants Congress to make it retroactive in the negotiations over the final package. That means, if all goes as the president would like, and Democrats embrace this part of it, the tax cuts will be retroactive to January 1st of this year.

So once they enacted the tax customer, payroll taxes would come down. So you would see some in your payroll taxes immediately. And then when you filed your taxes next year, you would get that tax cut retroactive to the first of the year.

Again that's subject to the negotiations that need to go on with the Congress. But there now seems a bipartisan consensus that when this happens, make it retroactive.

Some will say, though, that increases the price tag. So there will be a fight over some of the details.

CHEN: Our senior White House correspondent John King for us today.

Not since Ronald Reagan was in the White House has such a large tax cut been proposed. Some Democrats argue it is too large, as John told us, and too generous to those who have the most. Are we in an uphill battle for this on Capitol Hill?

Our Congressional correspondent Jonathan Karl gauging some reaction there -- Jon.

JONATHAN KARL, CNN CORRESPONDENT: Well, Joie, you mentioned Reagan. There's probably more momentum up here on the Hill for a major tax cut than there has been in any time since Ronald Reagan was in the White House.

Democrats now are talking about a tax cut to the tune of $900 billion. That's almost double the kind of tax cut they were talking about just last year.

But as John alluded to, Democrats up here on the Hill clearly believe that Bush's $1.6 trillion tax cut is simply too expensive, and that it simply tilts towards the rich too much.

Democrats are basically making the argument that the federal surplus will be put in jeopardy by this Bush tax cut.

Summarizing that argument was Harry Reid earlier today, talking with CNN's Kate Snow. Harry Reid is the number-two Democrat in the Senate.

Here's what he had to say.


SEN. HARRY REID (D), NEVADA: Whatever tax cut we give, we are in favor of tax cuts. Democrats want a tax cut. It's a question of how much. Are we going to be able to spend all that money we don't have now? Or would we be better approaching it a little more cautiously? We have to protect Social Security, Medicare. We have to give reasonable tax cuts; but most of all, do something about the huge debt that's facing us now.


KARL: And Democrats are talking a lot about paying down the debt now. The argument they are making is that tax cut is not so much that the Bush tax cut benefits the rich too much -- although you'll hear some of that. But what they're talking about is they are saying that the tax cut is too big, that it is irresponsible that it would blow away that surplus. But Republicans are saying that Democrats aren't really concerned about the debt, that instead, Democrats oppose such a big tax cut because they want to spend the money instead.


SEN. PHIL GRAMM (R), TEXAS: Well, first of all, I laughed, to begin with. Now, these are the same people that, in the last six months, have added $561 billion to federal spending. At that rate, in 18 months, they'll have spent the whole tax cut.


KARL: And that's Senator Phil Gramm, one of the key Republicans on the tax issue. And what he is saying is that the Bush plan, when it comes up here, the full Bush budget, will guarantee that the federal debt, the entire federal debt will be paid off in 11 years. This has not seen yet out of the Bush White House. But this is what Gramm is saying the Bush people are telling him.

Gramm insists that ultimately the $1.6 trillion tax cut that Bush is proposing, or at least something very similar and about that size, will ultimately pass the Senate, with as many as 65 votes. That would mean at least 15 Democrats coming over and supporting the Bush plan. Right now there is only one Democrat that has been out here support of it, and that's Zell Miller of Georgia.

But Gramm says that he's working very hard to try get at least one or two more Democrats on board early, and out there side-by-side with Republicans, making the case for a very large tax cut and very soon -- Joie.

CHEN: CNN's Jonathan Karl for us on Capitol Hill.



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