Briefing on the Sept. 11th Terrorst Attacks

House Passes Stimulus Plan Favoring Business Tax Breaks

By Richard W. Stevenson, The New York Times
October 24, 2001

WASHINGTON, Oct. 24 Saying that the best way to preserve jobs and revive the economy is to provide businesses with tax breaks, Republicans muscled their version of an economic recovery plan through the House of Representatives today, brushing aside criticism from Democrats that the bill did too little for the unemployed and other people who need help the most.

The vote was 216 to 214. Seven Republicans voted against the bill. Three Democrats voted for it.

The narrow margin of victory reflected an intense, often-bitter partisan debate on the House floor over how best to encourage recovery from the economic slowdown that began a year ago and intensified following the terrorist attacks last month.

It also suggested that many of the House bill's provisions are likely to be stripped out or scaled back in the Senate, which is controlled by Democrats. Efforts to negotiate a bipartisan compromise in the Senate have been faltering, all but ending hopes expressed by both sides of getting a bill signed into law quickly at a time when layoffs are mounting, corporate profits are withering and consumer and investor confidence is eroding.

The House legislation's centerpiece is a package of corporate tax cuts that would total more than $70 billion this year. The bill also includes $28 billion in tax cuts for individuals and $12 billion to help states bolster programs for people who have lost jobs.

Under pressure from Democrats to explain their focus on companies rather than individuals, Republicans said that assisting corporations would help avert further layoffs and lay the groundwork for an economic rebound by encouraging companies to invest more in new equipment and factories.

"Something very important has gotten lost in the furious slinging of accusations over who benefits from the business components of this bill," said Representative Bill Thomas of California, the main author of the Republican plan. "And that is the plain fact that businesses are America's employers. They're the hardware store, the diner down the street, the gas station on the corner. They're not the enemy of working families."

Democrats said that Republican plan benefited big companies at the expense of working people and those who have lost jobs, and that it would do little to help the economy pull out of its steep downturn.

Most of the benefits of the business tax cuts would go not to small businesses but to a relative handful of big corporations, Democrats said. The tax cuts for individuals, they said, were skewed to middle- and upper-income people. And Democrats said the provisions in the bill to help states deal with surging unemployment were woefully inadequate.

"This bill is a giant tax giveaway to corporations and the wealthy," said Representative Richard A. Gephardt of Missouri, the Democratic leader in the House.

Democrats repeatedly attacked a provision in the bill that would repeal the corporate alternative minimum tax, which was created in 1986 to make sure that companies could not escape paying income taxes through use of deductions. The bill would not only end the tax, but in effect allow companies to claim refunds of the tax back to 1986.

The repeal of the tax and the refunds would cost a total of $25.4 billion this year. According to the nonpartisan Congressional Research Service, seven corporations would receive $3.3 billion of the $25.4 billion. Among them are I.B.M., which could receive $1.4 billion, General Motors, which could receive $832 million and General Electric, which could get $671 million.

The Bush administration said it strongly supported the bill, and President Bush reiterated his case today for an emphasis on tax cuts including repeal of the corporate minimum tax in assembling a recovery plan.

But even as the House was debating the legislation, Treasury Secretary Paul H. O'Neill was huddled in a conference room in the Capitol trying to revive bipartisan negotiations in the Senate that would almost certainly jettison a number of the provisions that the White House and House Republicans support.

After early pledges from both parties to work together on the plan, negotiations on an economic recovery plan have deteriorated into angry partisan arguments. In an attempt to bring the two sides together, a group of centrists from both parties in the Senate invited Mr. O'Neill to meet with them later today.

© 2001 The New York Times