Chafee, Feinstein Partner to Freeze Tax Cut for Top Bracket
Bayh, Hutchison Press for Elimination of Marriage Penalty
Moderate Republican Sen. Lincoln Chafee (R.I.) broke with his party Thursday to join Democratic Sen. Dianne Feinstein (Calif.) in introducing legislation to freeze part of President Bush’s tax cut.
But Bush did get Democratic support for another of his tax proposals when Sens. Evan Bayh (D-Ind.) and Kay Bailey Hutchison (R-Texas) presented their legislation to immediately eliminate the so-called marriage penalty.
Feinstein and Chafee want to freeze the scheduled tax cut for the top income bracket, which is set to drop from 38.6 percent to 37.6 percent in 2004 and then again to 35 percent in 2006. Bush’s latest economic stimulus plan calls for moving up that timeframe, set by Congress last year, to make it retroactive to January 2003.
“With the nation once again facing growing budget deficits [we] will introduce legislation to freeze that top income rate … until such time as the federal budget returns to surpluses,” Feinstein said. “We believe the ballooning deficit is bad for the economy, bad for interest rates and bad for the health of the nation.”
She went on to point out that only 908,000 people fall into that bracket.
“This is not a time for tax policies which benefit only a small portion of the population,” Feinstein said.
Chafee added that their proposal would reduce the country’s projected debt by $88 billion.
“Finally, I strongly believe that these savings should be devoted exclusively to deficit reduction; not new spending programs,” Chafee said.
While Senate watchers have speculated that Chafee, a moderate Northeastern Republican, might bolt the party, he said the bill he and Feinstein wrote dovetails with GOP philosophy.
“I see this as a Republican issue,” he said, adding that debt reduction should be his party’s “rallying cry.”
No sooner had they exited the stage than Hutchison and Bayh entered to promote their bill, which is part of the $674 billion economic package Bush announced Tuesday.
The bill would permanently increase the tax cuts for married couples that Congress passed last year.
Under the plan, the standard deduction for married couples filing jointly would increase by $1,550 so that in 2003 couples could write off $9,500, instead of the $7,950 they are entitled to under current law.
“It’s simply wrong for the government to tax couples simply for saying ‘I do,’” Hutchison said.
The bill, which Hutchison said would benefit 46 million couples, would also raise by $3,000 the income levels at which the Earned Income Tax Credit begins to phase out for married couples filing jointly.
That would really help low- and middle-income families who could do a lot to jump-start the economy if they had more money in their pockets, she said.
While Republicans are likely to back the bill, Bayh said it also has the support of many Democrats.