House kills Democrats' bill to tax rich, fund programs

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In a showdown on the tax-cutting priorities of the two parties, House Republicans defeated a Democratic-led bill to tax the wealthiest Americans to the tune of $19 billion next year and spend the money on domestic programs.

Republicans pushed their own bill designed to cap one-third of the spending controlled by Congress, and reinstate the "PayGo" system, which would require programs to be funded by cuts in other programs. The House had 20 amendments to consider late last night before a final vote could be taken.

But the Democrat's bill introduced by Rep. David R. Obey of Wisconsin would have limited the tax cut for the top 200,000 Americans who net $1 million or more annually from $124,000 to $24,000.

"We have a war that will cost us $250 billion by the end of next year and how do we pay for it? We could ask the wealthiest 200,000 people to make the ultimate sacrifice and limit their tax cut," Mr. Obey said.

None of the money raised would have gone directly to war costs: $4.3 billion would have gone to reduce the deficit, $3 billion to Homeland Security, $5.7 billion to education, $2 billion to Pell education grants and the rest going for other programs cut this year because of the country's rising deficit.

House Democrats argued that the bill only halted the tax cut, which would go into effect next year until 2006, and that it affected only 3.8 percent of the nation's small businesses that claim more than $1 million in profits each year.

The bill, which failed 230-187, had no chance of passing.

Yet, House Majority Leader Tom DeLay, Texas Republican, said he was happy to hold the philosophical debate on priorities as part of a deal made with Democrats to prevent obstruction on House appropriations bills.

"I thank [Mr. Obey] for having the courage to raise this debate ... the resolution before us crystallizes the debate in this country between Democrats and Republicans," Mr. DeLay said.

He said 83 percent of the taxpayers to be affected by Mr. Obey's legislation are small-business owners -- farmers, doctors and store owners -- who collectively create the largest bulk of jobs for the American people.

"This resolution, after gutting the economic expansion and not providing all of the revenue we need, goes for the triple crown of using the money to spend; tax and spend ... this is liberal economic incompetence."

Republicans touted the "Spending Control Act of 2004" that would implement a pay-as-you-go program discretionary spending -- one-third of the spending controlled by Congress, which is used to fund federal department and agencies -- and cap mandatory spending -- funding for Social Security and Medicare among other programs.

The PayGo spending would require increase in expenditures to be covered by cuts from other programs and is backed by the White House.

But dissension among Democrats arose when they sought to place the Bush tax cuts under the spending rules, seeing them as a loss of revenue, while Republicans demanded they be left out.

"The Republican pay-as-you-go proposal won't work; leaving revenues out of it is ridiculous," said Rep. Jim McDermott, Washington Democrat.

But Republicans responded that the tax cuts are not the problem; it is Congress' overspending.