Kennedy urges delay of parts of tax cut to pay for education, prescription drugs

Wednesday, January 16th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ Sen. Edward M. Kennedy said Wednesday that some tax cuts now scheduled to take effect in 2004 and beyond should be delayed so the government can afford other pressing priorities such as education and a Medicare prescription drug benefit.

Kennedy, one of the few prominent Democrats to propose putting off multiple parts of President Bush's 10-year, $1.35 trillion tax cut, said the delay would free up $350 billion for these needs without borrowing from the Social Security and Medicare funds.

The tax cut, he said, was enacted before an economic recession began eroding the government's sunny surplus projections and prior to the Sept. 11 terror attacks that prompted a raft of new defense and security spending.

``Whatever the merits or demerits of last year's tax bill, it was enacted in what now seems a very different and distant time,'' Kennedy, D-Mass., said in a speech prepared for delivery at the National Press Club. ``We must think anew, and act responsibly.''

The White House disagreed openly with Kennedy. When asked whether Bush considered the senator's plan tantamount to a tax increase, White House spokesman Ari Fleischer replied, ``Y-E-S. Yes. No question about it.''

He noted that several Democratic senators disagree with their party's leadership over this issue, and said the fact that Kennedy is suggesting a delay affirms that ``the Democratic leadership aches in its bones to raise taxes.''

With the tax cut now scheduled to expire at the end of 2010 because of a Senate budget rule, Kennedy's postponement could effectively eliminate promised tax reductions for upper-income taxpayers and keep in place the estate tax for inheritances above $4 million. Other tax breaks, such as scheduled increases in the child tax credit, would go forward.

Income tax brackets above the 15 percent level are supposed to go down 1 percentage point in 2004, with another round in 2006. The estate tax is supposed to be repealed in 2010.

Kennedy said taxpayers earning less than $130,000 would not be affected by the delayed income tax cuts he proposes and that higher-income people ``will still be receiving billions of dollars in new tax breaks'' even if Congress enacted his proposal.

``Future additional tax breaks for the wealthy do not deserve a higher priority than strengthening education, or covering prescription drugs under Medicare, or protecting Social Security, or meeting other urgent national priorities,'' Kennedy said.

Many Democrats contend the tax cut will consume too much of the federal budget surplus and hinder spending on other priorities, but few have taken the political risk of calling for a repeal or rollback. Twelve Senate Democrats, six of them up for re-election this year, voted for the tax cut.

One of them, Sen. Max Baucus of Montana, the Senate Finance Committee chairman, ``respectfully disagrees'' with Kennedy, said spokesman Mike Siegel, adding that Baucus ``doesn't feel it would be appropriate to revisit the tax cut in the midst of a recession.''

Kennedy, chairman of the Senate Health, Education, Labor and Pensions Committee, said the nation faces too many challenges to keep the entire tax cut in place. For example, he said that enough money should be spent on Head Start to ensure all eligible children are enrolled, not just three out of every five as under current law.

On health care, Kennedy said Congress should pass a patient's bill of rights, enact a prescription drug benefit under Medicare and take steps to enable more people to afford health insurance.

Lawmakers should also increase the minimum wage, revisit gun control and work to safeguard workers' retirement savings in the wake of the collapse of Enron Corp., he said.

``The spirit of this new time is placing major new demands on our national resources, and those demands must take priority,'' Kennedy said.