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Senate Approves Budget Plan Outline Includes Tax Cut; Four Percent Spending Growth

By Glenn Kessler

The Senate gave final approval Thursday to a broad budget plan endorsed by President Bush that will permit the biggest tax cut in two decades and aims to restrain spending on a range of nonmilitary domestic programs.

The budget outline, which passed the House Wednesday on a near party-line vote, will allow Congress to craft a $1.25 trillion tax cut over the next decade as well as provide $100 billion in immediate tax relief to stimulate the economy. Spending on annually funded programs would increase four percent, an ambitious goal for a Congress that boosted non-defense spending eight percent a year ago.

The budget plan does not require the president’s signature and is frequently ignored as lawmakers craft tax and spending legislation. But this year it is crucially important to the White House because, under Senate rules, a tax cut that fits within the budget framework will require only a majority of the votes for passage in a Senate divided 50-50 between Democrats and Republicans. Without the protection of the budget process, the tax cut would need 60 votes and face unlimited amendments.

The budget outline, negotiated largely among the GOP leadership and the White House, was approved 53-47 largely along party lines, as only five Democrats joined 48 Republicans in backing the plan. Ten Democrats and two Republicans who had voted for an earlier budget blueprint abandoned their support after billions of dollars in education funding were removed in negotiations with the House.

Passage of the budget outline set the stage for the Senate Finance Committee to formally take up Bush’s tax-cut proposal, which includes an across-the-board reduction in personal income tax rates, a doubling of the child tax credit, an easing of the penalty paid by some married couples, and elimination of the estate tax. The overall 10-year, $1.25 trillion cost is smaller that the $1.6 trillion first outlined by Bush but would still constitute the biggest tax reduction since 1981.

Members of the finance panel are negotiating how to retain the central elements of the Bush plan, reduce it to the figure envisioned in the budget plan and still win bipartisan support. The emerging legislation would immediately implement a cut in the bottom tax rate and delay until well in the decade deeper cuts in the top rates. The various compromises could result in a bill that, when fully effective, reduces revenues even more than the original Bush plan, though not in the decade covered by the budget blueprint.

The budget plan orders the Finance Committee to complete its work by next Friday, with GOP leaders hoping to deliver a final bill to the president’s desk by Memorial Day.