Bush faces a tax cut fight from own party

Extension: Bush wants five more years; a group of Senate moderates is pushing for just one
By Mary Dalrymple
The Associated Press

WASHINGTON - Republican divisions in the Senate could complicate efforts to extend three of President Bush's most popular tax cuts this week. If allowed to expire, Americans could pay $50 more in taxes - and lose up to $300 in tax benefits for each child - next year.
President Bush asked Congress to act quickly and extend popular tax cuts for parents, married couples and wage earners this week. The timing would put the president's tax reductions back in the spotlight as the election heats up and the Republican and Democratic parties hold conventions to nominate their presidential candidates.
A group of the Senate's Republican and Democratic moderates on Monday asked GOP leaders to consider the growing federal deficit as they work to safeguard the tax cuts.
''The last thing our hard-working American families expect is a higher tax bill next year,'' said Sen. Max Baucus of Montana, ranking Democrat on the Senate Finance Committee. ''Our bipartisan proposal is a road map to cut taxes without adding to our deficit woes.''
Divisions among Senate Republicans thwarted efforts this year to write a budget outlining spending and tax policies for 2005 because they didn't put limits on future tax cuts. Republicans control the Senate by a bare two votes, enabling moderates to exert a strong influence on tax and spending policies.
Several of those moderates want to see the three popular tax cuts locked in for one more year and its roughly $30 billion cost be paid for by closing tax shelters and loopholes and retaining customs service fees.
''In an atmosphere of increasingly less cooperation, I am pleased to be working with a bipartisan group of senators on a fiscally responsible proposal,'' said Sen. Lincoln Chafee, R-R.I.
A spokeswoman for Senate Finance Committee Chairman Charles Grassley, R-Iowa, said his top priority is to fashion a bill that can pass the House and Senate and become law to prevent the tax cuts from ending, and he plans to weigh all viewpoints.

House Speaker Dennis Hastert, R-Ill., told reporters last week that Bush doesn't want revenue increases that offset the cost of tax cuts in this bill.
The senators who joined Baucus and Chafee to propose extending tax cuts for a year without worsening budget deficits include John Breaux, D-La.; Blanche Lincoln, D-Ark.; and John McCain, R-Ariz.; and Sen. Olympia Snowe, R-Maine.
House and Senate tax writers have yet to assemble the tax bill that Bush wants this week. Preserving his tax cuts for five years would cost about 20 billion, including an additional change that would prevent the alternative minimum tax from seeping into the middle class for a year. The alternative minimum tax was designed to stop wealthy individuals from dodging taxes but affects more taxpayers with lower incomes because of the impact of inflation.
The moderates proposing one more year of the popular tax reduction do not include any change in the alternative minimum tax in their proposal, under the assumption that Congress will work on that problem next year.

If the tax cuts expire . . .

*Child tax credit would drop from $1,000 to $700.

* Bottom 10 percent tax bracket would shrink, increasing to 15 percent from 10 percent the taxes on about $1,000 in income.

*Married couples who had enjoyed benefits from an increased standard deduction and wider tax brackets would see some of those benefits disappear.

Plus, we might be able to afford to pay for stuff!