Voinovich agrees to tax-cut proposal

Voinovich had drawn ire from others in his party for his initial resistance.
By DAVID ENRICH
STATES NEWS SERVICE
WASHINGTON --
Voinovich was among a handful of Republican senators resisting the plan, the centerpiece of which was the elimination of taxes on dividend income.
Voinovich objected to any package that cost more than $350 billion over 10 years because of the potential impact on the federal deficit.
His stance infuriated conservatives. President Bush traveled to Ohio for high-profile events promoting his plan, and a conservative group, the Club for Growth, aired television ads in Ohio attacking the senator.
Nickles' proposal
But Thursday, Voinovich endorsed a proposal by Sen. Don Nickles, R-Okla., that would stop taxing dividend income for three years and then would reinstate the tax in 2007. The plan also includes $20 billion in aid to state and local governments and a tax deduction for small businesses.
With Voinovich and Democratic Sen. Ben Nelson of Nebraska providing the decisive votes for the plan, the Senate approved its central components Thursday.
But the only way the tax-cut plan fit Voinovich's spending constraints was by having the bulk of the tax cuts expire in 2007. If the tax cuts were made permanent, the actual 10-year cost would be hundreds of billions of dollars higher.
In 2007, Congress will have to choose between letting the current cuts expire or making them permanent.
Charges of gimmickry
Some Democrats and liberal groups accuse Voinovich and Senate Republican leaders of relying on budget gimmicks to justify their tax-cut package.
The Center on Budget and Policy Priorities, a liberal advocacy group in Washington, estimated that if the dividend tax cuts were permanently eliminated, the total cost would be at least $660 billion over 10 years.
Robert Greenstein, the center's executive director, said the Senate was using "Enron-style accounting." He said the argument that the tax-cut package will remain within the Senate's self-imposed $350 billion limit is "based on assumptions everyone knows to be false, such as that various major tax cuts will simply be allowed to expire."
Voinovich countered that having the tax cuts expire in 2007 forces Congress to determine the economic impact.
Voinovich said a key factor in persuading him to endorse the package was a pledge from top White House officials and Senate leaders to establish a commission to examine federal tax reform.
Although his tax cut votes Thursday might help thaw relations with his Republican colleagues, Voinovich cautioned he might oppose whatever bill comes out of a House-Senate conference committee that will have to reconcile the vast differences between the two chambers.
"I think that there's going to be some difficult days ahead," Voinovich said.