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CNN BREAKING NEWS

Tax Cut Reduced to Half by Congress

Aired March 25, 2003 - 14:53   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JUDY WOODRUFF, CNN ANCHOR: As we listen to Ari Fleischer at the White House and of course with the president focused almost entirely on this war, we want to tell you that word just in that the president has been dealt an important domestic setback. And that is that his tax cut package, which is before the Congress, in the United States Senate, Republican-controlled Senate, that package has been cut more than half by a body, again, which is majority Republican.
Let's go quickly to the Hill, to our reporter, Jon Karl -- Jon.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Judy, this is quite a blow for the president's tax plan, and it comes as somewhat of a surprise because Republicans had beaten back a similar effort on Friday to cut the tax cut in half. The tax cut now, after this amendment in the Senate, stands at $350 billion.

There were three Republicans who joined with all of the Democrats who were present here today to vote in favor of this measure to cut the tax cut in half, three Republicans crossing party lines. They were Olympia Snowe of Maine, Lincoln Chafee of Rhode Island and Senator Voinovich of Ohio. They joining with the Democrats on this.

What this does is it takes the $726 billion that had been set aside in the president's budget for a tax cut and reduces it to $350 billion. Now, last week, the Senate had reduced that $726 figure by $100 billion to help pay for the war in Iraq. This is a further erosion of the president's tax cut, and a sign that when it comes time to actually drafting that tax cut and getting it through the Congress, the president will have a very hard time of getting anything passed above this $350 billion mark.

So a significant domestic setback for the president in his domestic policy, even as there is widespread support up here for the effort in Iraq -- Judy.

WOODRUFF: OK, Jon, I'm going to ask you one other question. We may be showing our viewers, though, some video from Baghdad. Just seconds ago, moments ago, sirens going off in Baghdad. And if we can get that picture up, we will show it to our audience again. My understanding is these sirens went off for a few seconds and then stopped. Again, these pictures from just a moment ago.

Jon Karl, if you are still with us, we want to be clear -- and I'm not sure, you may have clarified this. But the House of Representatives can be expected to overwhelmingly support the president's budget, the tax cut proposal. So whatever comes out of the Senate and the House, the agreement in conference is going to be somewhere between the two, we can assume.

KARL: There is no question. As a matter of fact, Judy, last week, the House of Representatives did pass a budget that included the full tax cut requested by the president. They narrowly passed it by just a three-vote margin. So now you'll have the Senate coming in with something considerably less. The two will have to get together and come to some kind of a compromise.

But what this signals is that there are 51 votes in the United States Senate against any tax cut more than $351 billion. So at the end of the day, it's going to be very hard for the president, for Republicans, to pass anything larger than that. Remember, what we're talking about right now is the president's budget. And it's leaving a hole in the budget for that tax cut. The Congress will have to comet together once again, later in the year, to actually craft the details of that tax cut. Now you've got 51 senators on record saying no way, they're not going to go more than $350 million.

WOODRUFF: And all this happening after members of Congress learning the price tag or at least the opening bid on the price tag of this war. All right, Jonathan Karl, reporting on an important domestic setback for President Bush with his tax cut proposal, even as he wages this war in Iraq. Let's quickly get back to the White House, to Ari Fleischer.

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