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Democratic Leaders Unveil Alternative to Bush Tax Plan

Aired March 1, 2001 - 9:36 a.m. ET


LEON HARRIS, CNN ANCHOR: Right now, the Democrats are getting prepared. They're in Washington right now and about to enter the room. We should see here the Democratic leadership. There you see Sen. Tom Daschle and Minority Leader of the House Dick Gephardt. They are going to be introducing the Democrats' response to George W. Bush's tax plan.


We are here today to make good on our promise to cut taxes for all Americans. As I've been saying for weeks, Democrats are for a significant tax cut which is fair and responsible to all Americans, and a tax cut that leaves enough room to balance the highest needs and greatest priorities of hard-working American families.

Twenty-four hours after President Bush sent us his budget plan, Republicans in Congress are trying to rush through the Ways and Means Committee, today, a $1 trillion-plus tax cut. This is the first installment on a massive $2 trillion-plus tax plan that will crowd out every other priority in our country. We think there's a better way.

Democrats made a different decision. Our budget invests in all hard-working families. We devote one-third of the available surplus to debt reduction, Social Security and Medicare; one-third to education, a Medicare prescription drug benefit, defense and other vital priorities; and finally, one-third to a $900 billion tax cut plan.

Today, my colleagues and I make good on our commitment to do everything we can to cut taxes for all taxpayers. Our plan gives them exactly that. But our tax cut, unlike the Bush plan, gives the most help to people in the middle and those trying to get in the middle. Our plan lowers rates for everyone. We bring the 15 percent rate down to 12 percent so that every payer gets this tax cut.

We expand the earned income credit so people of modest means get relief from the payroll tax. We help families unfairly penalized by the marriage penalty, by making the standard deduction for married couples double that for single people. And we provide sensible, reasonable relief on estate taxes.

Our plan helps family farms and family-owned businesses by eliminating the tax burden on two-thirds of estates. Our plan does not squander the whole surplus on a massive tax break for the wealthy, which is exactly what the president proposes to do. We believe that if you work hard and build your estate, you should be able to pass family farms and small businesses on to the next generation.

President Bush wants to eliminate estate taxes for the wealthiest of the wealthy. His plan would hurt charitable giving. And even those who have the most to gain are calling it a mistake. Bill Gates Sr., Warren Buffet, and others, have said the president's plan gives so much to so few that the cost, and I quote, "will have to be made up by increasing taxes on those less able to pay or by cutting Social Security, Medicare and other programs so important to the nation's continued well-being," end of quote.

The president's tax plan gobbles up virtually the entire available surplus, after you account for Social Security and Medicare. His plan threatens every other initiative supported by the American people. Our plan fits within a reasonable budget framework; we cut taxes for everyone and focus relief on those who need the tax cuts the most.

In his address the other night, President Bush talked about a waitress supporting two children on $25,000 a year, but, in fact, under the president's plan, she would get next to nothing because she pays very little in income taxes and a lot of her salary in payroll taxes. Under our plan, she would get a real tax break, about $350. The president is hiding behind people like this hard-working waitress to distract attention from the people who are really getting the lion's share of his tax cut, the very wealthiest Americans.

In addition, our plan provides families with, among other things, a better education for their children, a guarantee that Social Security and Medicare will be there when they need it, and lower interest rates on their credit cards and their car loans. Our plan will allow us to keep paying down the national debt. It keeps us on the track of fiscal discipline and economic prosperity. And it's the only plan that delivers on the goal we all share, and that is leaving no child behind.

Now I'd like to call on Tom Daschle, the great leader in the Senate, who's worked with us day by day on both these budget and tax matters.


The Democratic tax plan is one of a three-part budget plan, as Dick just described, that is balanced and is responsible. Unlike the president's plan, which includes huge tax cuts and little else, our plan cuts taxes and funds our nation's most important priorities. We use one-third of the surplus, $900 billion, including interest, for the tax cuts; we set aside another one-third for Social Security and Medicare reforms; and as a hedge in case the surplus projections prove overly optimistic, we invest one-third in the prescription drug coverage, education, and other key priorities. One-third, one-third, one-third.

We hope that the president and our Republican colleagues will take a careful look at our plan. If they do, they might just like what they see. Our plan cuts taxes for more taxpayers than the president's plan does. It cuts rates for everyone who pays federal income taxes, and it expands the Earned Income Tax Credit, so that families who don't pay income taxes but do pay payroll taxes don't get left behind.

Our plan also includes significant marriage penalty and estate tax relief. And our plan fully protects every cent of Social Security and Medicare, unlike the president's plan.

The president's plan doesn't protect every dollar, and it doesn't fund important priorities because it can't. The reason it can't is because of the oversized tax cuts that crowd out every other priority the American people care about.

Our plan is more balanced than the president's, it is more responsible and it is fairer. The president's tax cut is biased in favor of the wealthiest Americans; 43 percent of the benefits go to people with an average income of over $900,000. That isn't fair, and the American people know it.

Our plan delivers more tax relief sooner to American working families. I want to take a look at three American families that make our case.

Let's start with a family of four that makes $25,000 a year -- a firefighter in my home town of Aberdeen, South Dakota, for example. Under the administration plan, they would get absolutely nothing, no tax relief at all next year or in the next four years. Under our plan, the same family would get $845 next year and $2,535 over the next four years. That's enough to buy a good used car or a lot of other things the family might need.

Let's take a look at another family, this one making $50,000. We've heard a lot about those families in the last couple of weeks. The president has referred to those families. Under the administration's plan, this family would get $320 next year and $1,920 over the next four years. Our plan would provide $525 next year, and over the next four years, they would still make more under our plan than they would under the president's, as you can see, $2,235.

We'll take a family of a little higher means, $75,000. Under the administration's plan, this family would get $426 next year, and $2,334 over the next four years. Under our plan, they would receive $525 next year and an amount equivalent to what they would get under the president's plan over the next four years.

What you don't see here is a chart for those making $900,000 a year, because there's no way we can match the president's plan for those families, nor would we try. We can't give those families a $46,000 tax cut and still pay down the debt and pay for critical priorities, like prescription drug coverage, education and defense, although they get a tax cut as well.

Every single taxpayer under our plan will get a cut of some kind.

In drafting this alternative, Democrats had three principles in mind. First, our tax cut had to fit within a responsible budget that allocates a third of the surplus to a tax cut, a third for prescription drugs and other priorities, and a third for deficit reduction. Second, we wanted a tax cut for everyone who pays income taxes. And, third, we wanted to provide tax relief for families who pay only payroll taxes -- families who get no tax cut at all under the administration plan.

This Democratic alternative lives up to those principles, and it is a framework we hope Congress will adopt at the end of this process. Along the way, there are certain to be additional good ideas proposed by Republicans and Democrats. We look forward to working with our colleagues on both sides of the aisle to fashion a tax cut legislation that both parties can support.

A budget is really about choices. These are ours: Cut taxes for every family who pays federal taxes. Pay down the debt to keep interest rates low. Protect Social Security and Medicare. And, invest in critical priorities.

When you ask people in South Dakota and across America which approach they prefer, they agree with us. They want a balanced plan that cuts taxes and funds essential priorities, not a huge, risky tax cut that neglects our responsibilities.

Now it is my pleasure to introduce the ranking member of the House Ways and Means Committee, Charlie Rangel.

REP. CHARLIE RANGEL (D), NEW YORK: Thank you, Senator Daschle, Leader Gephardt.

I leave here after I finish speaking because the Ways and Means Committee -- that is, the chairman of the Ways and Means Committee, Bill Thomas -- announced earlier this week that they will be marking up the president's tax bill.

There has been a lot of talk from President Bush about a bipartisan atmosphere in order to give and take on the tax bill. Bill Thomas and Republicans on Ways and Means have had no discussion with me or any other members of the Ways and Means Committee, the Democratic members, about the tax bill. We just found out yesterday that they will not be handling President Bush's tax bill, but merely dealing with the rate changes, the marginal rate changes. That is to say that they think it is necessary to expedite the cutting of taxes by $1 trillion just in dealing with the marginal rates -- forgetting for now the estate tax bill, forgetting for now the marriage penalty bill.

And what they fail to say, and I have to go to find out, is how are they going to explain, as they adjust this bill to make up for mistakes that were not included in the so-called Bush tax bill, to increase this to $2.2 trillion?

I know that they don't mean to increase taxes through the alternative minimum tax, as they decrease taxes for those people in the middle income, but that's what happens. We're going to have to extend those favorable tax bills that expire. We're going to have to take into consideration the debt that we have for outstanding -- the interest that we have to pay on outstanding debt.

Why even in New York and California, where we are able to deduct our local and state taxes, those provisions are not allowed under the AMT. We have to take those things into consideration. And also, a lot of the credits given to children under existing law tax credits are excluded, and that's why you see these charts of the number of people that receive absolutely nothing.

One of the things that we Democrats are doing, which we don't really think has to be said, and that is, we truly believe that when the hard-working people pay taxes for Social Security, taxes for Medicare, that this is taxes on their income. The president says that only those who pay income taxes should receive income tax relief. We believe the difference between what you have earned and what you take home should be compensated for and we provide, through expansion of the earned income tax credit, to remove that pain.

The reason that we are so concerned is that we Democrats know that traditionally the Republicans have not really cared for the Social Security system, and so they talk privatization. They don't really care for the Medicare system, so they talk about health maintenance organizations. They don't really care that much about social programs and education, as they talk about vouchers and faith- based organizations doing it.

And if, indeed, there are mistakes made. And we hope that we don't have downturns in our economy. We hope that Speaker Hastert misspoke when he said some Democrats are praying or looking for a recession. We hope that that was just hyperbole. But the truth of the matter is that we all seriously want to have the greatest economy that this country can have and protect those programs that we fought so hard for.

If we do have a downturn, we know that we're not going to increase taxes, and we know it will be the programs that will be hurt in education and affordable prescription drugs.

And so I have to leave you. We have an alternative that will protect us, and we do recognize that they're saying that we have to hurriedly do this because there is a recession that's going on. Well, one, no economist has said we're having a recession. Number two, giving tax relief that is 60 percent of it to the highest 10 percent of the taxpayers and having 43 percent going to the top 1 percent is not going to spur the economy. We don't see a rush of these high- rollers going out to buy refrigerators and washing machines.

And, certainly, if we really want to do something to spur the economy, it would be those people that have obligations for rent and mortgages and food and clothing and would be targeting those people the same way we are.

So we have worked together with the House and the Senate and the leadership of both sides so that we will have an alternative to this careless and risky plan that's moving forward without the benefit of a budget. HARRIS: And with that, the budget debate is officially joined. We've been listening this morning to the Democratic leadership: the House minority leader, Dick Gephardt; and Senate majority -- minority leader, rather, Tom Daschle; and Charlie Rangel, who sits on the House Ways and Means Committee, explaining the Democrats' response to George W. Bush's tax cut plan.

Let's bring in our Kate Snow, who's also been listening. She's been outside on the Hill -- Kate.


Democrats presenting the numbers here this morning, but no big surprise about this message. They have been repeating the same message for several weeks now about how they feel about President Bush's tax cut. They think it's simply too big and it doesn't leave enough room for other spending. They say their plan will do that.

Dick Gephardt, the House minority leader, starting out, saying the Democratic alternative is a significant tax cut. And he said it is fair and responsible and leaves room for other spending.

Democrats emphasizing that they would cut taxes for every taxpayer. But if you listen closely, they think that their tax cut plan will mostly affect middle- lower-income Americans. And here's why: because their tax, what they're proposing, is to simply go after the lowest bracket. That is the 15 percent bracket.

Now, anyone who makes a certain amount pays in that 15 percent bracket right now. And even people who make over that amount, millionaires, pay in that 15 percent bracket on a certain amount of their income, on a very initial amount of their income.

So proportionately to their income, lower-income people and middle-income people are going to feel that tax break more when they lower that lowest bracket. Millionaires might not feel it so much.

So they're going to do that. They're going to attack the marriage penalty. They're also going to deal with the estate tax. And they talked about the earned income tax credit, another component of what they want to do -- Leon.

HARRIS: That's right. Good deal. Thanks much, Kate Snow, outside on Capitol Hill. Keep warm. We'll talk to you later on.



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