Shooting the tax Santa Claus

Robert Novak

11/24/2005 12:05:00 AM - Robert Novak

WASHINGTON -- The Republican majority in the House of Representatives got out of Washington last weekend for the long Thanksgiving holiday without passing a pending tax bill. It was not just the congressional tendency to put off doing today what can be postponed until tomorrow. There were not enough Republican votes to pass a quintessentially Republican tax bill.

 The reasons are profoundly disturbing. A goodly number of GOP House members have bought into the Democratic mantra that investment tax cuts, the backbone of economic recovery, are unfair to ordinary Americans. Having just narrowly passed a very modest curtailment of federal spending for the poor, the Republicans flinched at being accused of passing tax cuts for the rich. The leadership plans to take up the tax bill when Congress reconvenes in December, guessing that holiday turkey and relaxation will have ended last week's recalcitrance.

 The late supply-side pioneer Jude Wanniski wrote about two governmental Santa Clauses -- one bestowing spending increases and the other tax cuts. For 50 years until the supply-side revolution in the late 1970s, Republicans rejected both Santa Clauses and cemented their minority political status. It was no small matter last week that House Republicans looked like they were shooting at the tax Santa Claus.

 What the House does on taxes is critical because the bill passed by the Senate not only shoots at the tax Santa Claus but inflicts a mortal wound. Capital gains and dividend tax cuts due to end next year were not extended by the bill, which inflicts what amounts to an excess profits tax on big oil companies. The House bill crafted by Ways and Means Committee Chairman Bill Thomas corrects those deficiencies. He planned to pass his bill in the House last Friday or Saturday and then prevail in the House-Senate conference on the bill when Congress returns in December.

 Thomas pressed that plan in a special closed-door conference of House Republicans last Friday. But there were plenty of dissenters. They were fatigued, they said, from a Thursday night session that lasted until 1:41 a.m. to pass what was described as a Draconian spending bill but actually trimmed only $50 billion in projected increases from a $2.5 trillion budget. The spending bill passed by 217 to 215 against unanimous Democratic opposition after lacking a majority the previous week, and the members did not want immediately to undergo another ordeal.

 During the conference, some of these Republicans told colleagues it would be bad politics to follow spending cuts for the poor with tax cuts for the rich. They had bought into Democratic class warfare while rejecting Thomas's certifiable claims of how middle class Americans benefit from capital gains and dividends tax reductions.

 A subsequent Republican whip count showed insufficient support to pass the tax bill, reflecting a decline in discipline in House GOP ranks since Tom DeLay stepped aside as majority leader. A leaders-only meeting later Friday confirmed they did not have the votes. Besides, all attention was on the vote to counter Democratic Rep. John Murtha's defection from the Iraq war. House consideration of the tax bill was postponed.

 That postpones House correction of a Senate-passed tax bill crafted to the desires of one liberal Republican: Sen. Olympia Snowe of Maine. Her vote was needed to get the bill out of the Finance Committee, and she would not give it if the capital gains and dividend provisions were included. The oil windfall profits taxation was also described as necessary to secure Snowe's vote.

 But the un-Republican tax bill cannot be blamed entirely on one New England liberal. The Finance Committee chairman, Sen. Charles Grassley, came to Congress as an Iowa conservative and still talks a good conservative game. But Republican colleagues call him a prairie populist who was a willing co-conspirator with Snowe bashing big oil. His Senate bill is described by supply-siders as filled with "tax pork" enriching special interests.

 Those supply-siders now count on Bill Thomas, a master legislator but never a conservative favorite. When Congress returns, he has to get his bill through the House and then prevail over a stubborn Grassley in the conference committee in order to keep the tax Santa Claus alive.

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 I erred in a recent by column by reporting that April Foley, President Bush's choice for Export-Import Bank president, was never a corporate or government executive. She was Export-Import Bank first vice president from Dec. 15, 2003, to July 20, 2005.