Prometheus 6   

The Tax-Cut Fixation

The best thing to be said for the tax-cut legislation being concocted in the Republican-led Congress is that the Senate version finally accepts the idea of providing emergency fiscal aid to the deficit-battered states. Even so, the $20 billion proposed is short of actual needs and is likely to be undercut by fresh state revenue losses resulting from other negative factors in the G.O.P. proposals.

The worst thing to be said for the differing bills now moving through the two houses is that they continue to emphasize upper-bracket boons while totally ignoring the plight of the nation's unemployed workers. Most regrettably, the fight to kill off President Bush's favored dividend tax cut - thought to have been rejected earlier in the Senate - appears far from over. True, the latest Senate compromise won by Olympia Snowe of Maine trims this deficit-stoking measure to a quarter of the president's plan. But it introduces a sliding scale that would eventually let wealthier Americans shelter 20 percent of dividends.

One result of this compromise is to give dividend relief a foot in the door in the negotiations between House and Senate conferees later this month, when both chambers have completed work on their bills. Dividend cuts would have been unlikely if they had been struck from the Senate agenda. As it is now, the White House will have another chance to seek even larger dividend relief.

Meanwhile, the House bill heading for a vote today includes not only dividend relief but also a capital gains cut favored by persistent conservatives. They failed to win this windfall for the affluent two years ago, when there was a budget surplus. Now, despite record deficits and spiraling debt, they are determined to resurrect this bad idea for the final poker-game negotiations.

In another nod to the White House, both houses would accelerate the tax cuts enacted two years ago. The upper brackets are doing best here, too, with the top rate dropping to 35 percent, although speeding up child care and marriage credits will aid those further down the scale. Most unconscionably, neither house is repairing the damaging fine print in the president's plan that effectively denies these credits to children in the very poorest families.

Lower-income families, of course, would be the quickest to spend the money to help provide some of the stimulus the Republicans claim is their first priority. Instead, the G.O.P. remains fixated on high-income concerns, framing the reconciliation talks as little more than an exercise in dueling sugarplums.