Congress on tax cuts: No stopping us now

Plans are afoot to cut beyond $1.3 trillion - starting with relief for adoptive parents.

As Congress works out the details of divvying up a historic $1.3 trillion tax cut, the worst-kept secret in Washington is coming out in the open: There will be more tax cuts this session. Perhaps many more.

These additional cuts won't be as controversial as ending the estate tax on the biggest fortunes or giving rate cuts to the super-rich, key elements of the original package. Rather, they will be the kind of bills that require extra pages for all the sponsors who want to sign on - in other words, popular items that no one wants to vote against.

Early indications are that Round II will include new tax breaks for everything from adoptions to healthcare credits for the self-employed and stimulus cuts to bump up the economy.

Any of these cuts will exceed the $1.3 trillion cap agreed to by Democrats and Republicans in the budget resolution this month.

They will also likely exceed the $500 billion set aside for "contingencies" over the next decade - since that figure also must cover big-ticket items like saving Social Security and Medicare, improving public education, and developing a missile defense.

The result could be whopping deficits down the line, if the numbers don't add up. (Senate minority leader Tom Daschle quips that the best buy on Wall Street is bonds, because of the "huge deficits" ahead.)

But even those lawmakers most in favor of fiscal discipline may think twice before voting against a tax cut for adoptive parents of disabled children.

"We've got some tax cuts coming that are so nice that no one is going to be able to vote against them," says Sen. Don Nickles (R) of Oklahoma, assistant majority leader.

One of the most likely prospects to pass in this next round is the adoption tax credit. The $2.6 billion Hope for Children Act, extending the adoption tax credit due to expire this year, roared through the House Ways and Means Committee last week and is in the wings in the Senate.

If passed into law, it would create new incentives for people thinking about adopting children, especially children with special needs or those from abroad. The basic tax credit doubles in value from $5,000 to $10,000 and becomes permanent.

It also cuts out a lot of red tape. Under the current system, parents can deduct the cost of a wheelchair for a special-needs adoption only if a court ordered that they provide one. (Courts are reluctant to give such orders, because it makes adoption of special-needs children more difficult.) The new system allows adoptive parents of special-needs children to treat the $10,000 like a standard deduction - no need to itemize every expense. Also, travel abroad for an adoption will be tax-deductible.

It's an extremely popular measure. There are already 289 cosponsors in the House. And nine Democrats, including Senator Daschle, have joined GOP sponsors of the bill in the Senate.

"This tax credit increases the pool of people who can afford the up-front costs of adoption," says Patrick Purtill, president of the National Council for Adoption.

Once the first round of tax cuts makes it through Congress, the next phase begins in earnest. Republican staffers working on tax bills say they expect many "at the [federal tax-deduction] apple."

The next big vehicle for additional tax cuts could be a bill to raise the minimum wage. Last year, a proposed minimum-wage bill passed the House with more than $35 billion in tax cuts tacked on. The add-ons in this year's bill could top $100 billion, business groups say.

Tax breaks for business

Business lobbyists are pushing for a number of new cuts of their own, including deductions for health insurance for small companies, elimination of the 3 percent telephone excise tax (created a century ago to fund the Spanish-American war), and a permanent research-and-development tax credit. If the economy continues to stall out, they say they might even win reductions in the capital-gains tax.

President Bush had asked business leaders to avoid pushing their own agenda until his signature tax-cut items - an across-the-board rate cut, elimination of the marriage penalty and

estate tax - made it through Congress.

Now, business groups say it's time to move to their agenda.

"When they begin a second round of tax cuts, we'll be very vigorous players," says Thomas Donahue, president of the US Chamber of Commerce.

Conservative analysts add that if the Congressional Budget Office revises up its estimates of budget surpluses, that could add momentum to a second round of cuts.

Tough fight in the Senate

House Republicans are already on track to take up a series of smaller cuts.

But GOP moderates say that even popular tax breaks, such as the adoption tax credit, will have a tougher fight in a 50-50 Senate.

"You have to think that eventually, the people who have been here a long time will say that there's only so much money we can spend, and we have to make some choices," says Sen. Lincoln Chafee (R) of Rhode Island, whose opposition to Mr. Bush's $1.6 trillion tax-cut package forced the Senate to reduce it to $1.3 trillion.

(c) Copyright 2001. The Christian Science Monitor

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