Tax cuts seen 'vital' to avert recession
January 10, 2001
By John Godfrey
THE WASHINGTON TIMES
House Majority Leader Dick Armey told Republicans
yesterday that to avert a recession Congress should
immediately pass a retroactive, across-the-board cut in the
income-tax rate.
A recession may not be
inevitable, "but because the
economy is slowing down, I
believe it is vital that Congress
pass a pro-growth tax cut," the
Texas Republican wrote in a
memorandum to House
Republicans. The memo also was
posted on his World Wide Web
site (www.armey.house.gov) and
sent to reporters.
"The Fed has done its job, now
it's time for us to do ours," Mr. Armey wrote, referring to the
Federal Reserve Board's decision last week to lower interest
rates.
Conservative groups have called Mr. Armey's office to
express their support, said an aide there, but with Congress
not in session there has not yet been a chance to gauge
members' responses.
The push follows speculation that President-elect George
W. Bush may try to accelerate Congress' consideration of his
tax-cut plan.
"It is possible that we may need to implement it faster,"
Mr. Bush said of his tax-cut proposal at an economic forum
in Austin last week.
Mr. Armey said Congress should pass Mr. Bush's entire
tax-cut plan, but at the very least should "very quickly" pass a
proposed reduction in personal income-tax rates and
proposals to expand 401(k) plans and individual retirement
accounts.
"Some are arguing that we should put off the income-tax
rate cut until later in the year. I disagree," Mr. Armey said.
House Speaker J. Dennis Hastert, Illinois Republican, has
suggested that Congress and Mr. Bush should try to gain
several quick victories, focusing first on a repeal of the estate
and gift taxes and passage of tax cuts for married couples.
Pete Jeffries, a spokesman for Mr. Hastert, said yesterday
that Mr. Armey had proposed a novel idea.
"We are always looking to pass and enact meaningful tax
relief sooner rather than later," Mr. Jeffries said.
Some conservatives have worried that passing several
small tax bills will endanger momentum for a larger tax-cut
plan.
Mr. Armey's memorandum was, in part, intended to force
broader tax cuts back into the discussion, said one
Republican leadership aide.
The part of Mr. Bush's tax-cut plan Mr. Armey would
take up immediately would reduce by 2006 both the 39.6
percent and 36 percent marginal tax rates to 33 percent. In
the same time frame, the 31 percent and 28 percent marginal
tax rates would be cut to 25 percent.
The rate for the 15 percent bracket, which applies to the
first $27,000 of income for a single taxpayer, would not be
lowered. But Mr. Bush would create a new 10 percent tax
bracket that would apply to the first $6,000 of a taxpayer's
income.
Unlike Mr. Bush, who proposed phasing in those tax cuts
after Dec. 31 this year, Mr. Armey would make them
retroactively effective to Jan. 1, "so the impact can be felt
immediately."
Over the past year, as the sizes of projected budget
surpluses have increased, Democrats have been willing to
endorse larger tax cuts, but always substantially smaller than
those envisioned by Republicans.
Democratic aides said yesterday that Democrats still
intend to back an income-tax cut, but that such a bold
pronouncement from Mr. Armey delivered only to
Republicans did not bode well for bipartisanship.
"Congress should enact some permanent tax cuts, not
because we need them to rescue the economy, but because
middle-income Americans and people who have been left
behind by our prosperity need a tax break," Rep. Charles B.
Rangel, New York Democrat, said in an opinion piece
printed in Roll Call.
"The idea that massive back-loaded tax cuts are needed
now because we might be entering a recession is not based
on economic principles, but political opportunism," Mr.
Rangel wrote.
The rate cuts, coupled with the IRA and 401(k) proposals
Mr. Armey is suggesting, would cut taxes by about $900
billion over the next decade, according to estimates by the
Joint Committee on Taxation.
As for concerns that a recession itself might not leave
room in the federal budget for tax cuts, Mr. Armey argued
"that the whole point of pro-growth tax relief is to avoid
recession in the first place." |
