Social Security tax holiday gains some ground as part of economic stimulus

Wednesday, November 28th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ Congressional leaders left a White House meeting Wednesday promising to do what they can to reach agreement on an economic revival plan. Both sides said they were open to a proposal giving workers and employers a one-month holiday from Social Security taxes.

``The economy needs some boost,'' said Senate Minority Leader Trent Lott, R-Miss. ``We're going to find a way to do that _ soon.''

Lott was joined at the White House microphones by House Speaker Dennis Hastert, R-Ill., Senate Majority Leader Tom Daschle, D-S.D., and House Minority Leader Richard Gephardt, D-Mo. The leaders, after meeting with President Bush, said they were still divided over how to boost the economy but committed to breaking the deadlock as soon as possible.

A senior administration official, speaking on condition of anonymity, signaled that the president would agree to some sort of Social Security tax holiday, calling the proposal first suggested by Sen. Pete Domenici, R-N.M., a positive effort to find middle ground. White House spokesman Ari Fleischer called it ``an interesting idea.''

Democrats have said they are open to negotiations and would consider the Domenici proposal, but only if a $15 billion package of homeland security spending items be made part of the talks. Republicans have blocked a Democratic package including the items.

Daschle, showing a willingness to bend, said he would consider adding the security spending to the Department of Defense budget _ removing the issue from the economic stimulus debate. Daschle praised Domenici for offering the Social Security tax holiday idea but said he was concerned that the tax cuts would takes months to implement.

``If that is the case, I think it lessens our enthusiasm,'' Daschle said.

Replied Lott: ``It can be done, we think, quickly.''

Daschle said there were still substantial differences between Republicans and Democrats on the stimulus plan. ``We are committed to finding a way'' to close the gaps, he said.

Afterward, Lott said Daschle would be blamed if an agreement isn't reached. ``If we can't get a stimulus bill, it's going to be at the feet of the Senator Daschle and the Senate,'' Lott told CNN. Fleischer sought to put the onus on the Democratic-led Senate, not Bush, to break the stalemate.

``This is more urgent. The nation is now in recession,'' the presidential spokesman said. ``The Senate's message to unemployed Americans needs to be, `We are here to help.' Not, `We are here to go home.'''

A tax holiday would give workers and employers a one-month break from the 6.2 percent payroll tax that each pays into the Social Security Trust Fund. Self-employed people would get to keep the entire 12.4 percent for a month.

To prevent the already-threatened Social Security fund from losing money, the cost of the holiday _ about $43 billion if done in January _ would be replenished with a transfer from general tax revenues.

Domenici said a worker earning $40,000 a year would keep $207 more in earnings; a self-employed contractor would see a $413 increase in pay. Employers would also get infusions of cash.

``I have not seen a stimulus package that is better,'' said Domenici, ranking Republican on the Budget Committee.

The holiday proposal, part of a revised $100 billion stimulus package outlined Tuesday by GOP leaders, would essentially replace rebate checks of up to $600 for lower-income workers that were part of earlier versions.

Otherwise, the GOP plan contains many familiar items: reduction of the 27 percent tax bracket to 25 percent in 2002, instead of waiting until 2006; repeal of the corporate alternative minimum tax; an immediate 20 percent business depreciation write-off for three years; a 13-week extension of unemployment benefits; and $5 billion in grants that states could use to help the jobless pay health insurance premiums.

There were no signs that the latest GOP offer would bring Democrats and Republicans closer to a deal. In fact, the two sides spent much of Tuesday trading shots over which was being obstructionist.

Rep. Bill Thomas, R-Calif., who chairs the House Ways and Means Committee, told reporters that Democratic insistence on attaching the homeland security spending to the stimulus plan is designed to ensure that nothing passes.

``It is the Senate that has failed,'' Thomas said. ``Either Daschle can't lead, or he isn't willing to lead, and the end result is the same: failure.''

Daschle challenged Republicans to identify which items they specifically oppose, such as nuclear plant security, border security or more vaccines to combat bioterrorism.

``The homeland security bill is a direct response to the tragedy of Sept. 11,'' he said.