Senate opens debate on tax cut proposal

WASHINGTON -- The Senate opened debate Thursday on an 11-year, $1.35 trillion tax cut modeled after President Bush's proposal that Democrats say is far too large and provides the greatest benefits to the wealthiest Americans.

Democrats planned to offer a series of amendments intended to shift the tax cut toward lower- and middle-income people, reduce its size to about $900 billion and give people an immediate rebate check of at least $300 to stimulate the economy.

"This is totally skewed to the top end," said Sen. Kent Conrad, D-N.D.

A final vote on the package was set for Monday as Republicans race to get the bill to Bush by Memorial Day. Sen. Charles Grassley, R-Iowa, said the bill was a fair return to taxpayers of huge projected budget surpluses and would ensure the country's long-term economic health while meeting government spending priorities.

"There's too often in the minds of Congress that this is not the people's money, it's the government's money," said Grassley, chairman of the Senate Finance Committee. "Well, it is the people's money. We're going to let the American people keep more of the money they earn."

Democratic moderates, however, are warning that bipartisan support for the bill could fall apart if Republicans insist on changes that would enact deeper income tax cuts.

"This is a very, very fragile coalition," said Sen. John Breaux, D-La.

The real battle comes next week when senators negotiate with the House on the ultimate package, with GOP conservatives pushing for deeper income tax cuts and faster effective dates than the compromise plan envisions.

A major sticking point is how low to drop the top 39.6 percent income tax rate.

The compromise Senate bill reduces it to 36 percent by 2007. President Bush and House Republicans want the top rate cut to 33 percent and all the income tax cuts to occur over a shorter period. Other than immediate, retroactive creation of a new bottom 10 percent rate, the Senate bill phases in the rate cuts from 2002 to 2007.

"The president believes that the top rate should be what the House passed -- 33 percent," White House spokesman Ari Fleischer said. "He does not believe that anyone should pay more than one-third of their income to the federal government."

Under current law, the top 39.6 percent in 2001 applies to income above $297,350. Republican insistence on cutting that rate so deeply, Senate Minority Leader Tom Daschle said, demonstrates that the tax cut is "largely tilted toward those at the very top at the expense of everybody else."

Daschle, D-S.D., and other Democrats prepared a list of amendments intended mainly to boost the plan's benefits to lower- and middle-income people, including cutting the current lowest rate, 15 percent rate, to 14 percent, scrapping plans to repeal estate taxes and an immediate tax rebate as an economic stimulus.