Income tax rate cuts, health care main issues in stimulus talks

Wednesday, December 5th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ House Republicans offered to support a $30 billion package of extended unemployment benefits and health insurance assistance Wednesday in negotiations on legislation aimed at jump-starting the economy. Key Democrats praised the move.

The House Ways and Means Committee chairman, Rep. Bill Thomas, R-Calif., committed to support a 13-week extension of unemployment benefits for people who lost jobs after March 15, when economists say the U.S. recession began. Income taxes on those benefits would be suspended for 2002.

Thomas also proposed a 50 percent tax credit for the cost of health insurance. Both items are part of House GOP efforts to gain votes on a bill giving President Bush trade promotion authority, But Sen. Max Baucus, D-Mont., who chairs the Senate Finance Committee, said the move would help move economic stimulus talks along.

``This is a good development,'' Baucus said. ``That means it's more likely there will be a significant health insurance component in the stimulus package.''

The House-passed economic stimulus package included only $12 billion in grants states could use to lengthen jobless benefits or provide health insurance aid. ``This comes a long, long way,'' Baucus said.

Earlier Wednesday, congressional leaders pledged to work hard toward a compromise.

``There are differences on some of the tax matters but I think by and large we want to keep it simple and we want to get it done,'' said Senate Majority Leader Tom Daschle, D-S.D., after a breakfast meeting with Bush.

He was joined by House Minority Leader Richard Gephardt, D-Mo., and two Republicans: House Speaker Dennis Hastert of Illinois and Senate Minority Leader Trent Lott of Mississippi.

Key sticking points for Republicans and Democrats on legislation to bolster the faltering economy are whether to accelerate future income tax cuts and how much health insurance assistance to give the unemployed.

Despite broad differences on these and other issues, both sides emerged from the initial bargaining session Tuesday night optimistic they would craft a compromise Bush could sign into law before Congress recesses for the year.

``We're going to get it done,'' Baucus said.

The Bush administration was not represented in the first meeting, which Daschle said could make reaching a final deal more difficult.

``We don't have time to waste,'' Daschle said Tuesday night.

Hours later, standing outside the White House, Daschle and Lott said they expected to keep negotiators at the table throughout the weekend to strike a deal.

``We need to put confidence back in the markets and make sure the markets feel safe and secure when we get done with this stimulus package,'' Hastert said. ``I hope that we don't leave (for the holiday break) until we get this done.''

On many issues, the two sides are not far apart. There is general agreement that unemployment benefits should be extended for 13 weeks and that lower-income workers should get a tax break, probably a rebate check.

Republicans and Democrats both support some form of temporary bonus depreciation and enhanced expensing for business, which allow faster tax write-offs for investments such as equipment purchases.

Some Republicans are cooling to the idea of repealing the corporate alternative minimum tax _ opposed by many Democrats _ especially the House-passed provisions giving big companies billions of dollars in rebates for taxes paid as far back as 1986.

Bush told an audience in Orlando, Fla., that the tax should be reformed but that he doesn't believe ``we ought to be looking back for a decade.''

That leaves individual tax cuts and health insurance.

On tax cuts, the $100 billion House-passed stimulus bill would cut the 27 percent rate to 25 percent in 2002, four years ahead of schedule.

Some Republicans want to accelerate all the future individual rate cuts included in the 10-year, $1.35 trillion tax relief bill enacted earlier this year. They say such tax cuts are the best engine for economic growth.

But most Democrats are deeply opposed to a big tax cut and say they cannot support accelerating any rate cuts, which primarily benefit middle- and upper-income taxpayers. Daschle blames looming federal budget deficits on the tax cut already in place.

``After all, that's what got us into this mess in the first place,'' Daschle said.

On health insurance, Democrats sought to provide a 75 percent federal subsidy for COBRA policies available to the jobless and to temporarily provide states with more Medicaid funds. Bush and congressional Republicans proposed grants to states that could be used to help the unemployed afford health insurance.