WASHINGTON If Senate Finance Committee Chairman Charles E. Grassley could have his way, his bills to boost retirement savings and overhaul the bankruptcy system would be tacked onto the $1.35 trillion tax cut package he is shepherding through the Senate.
But even the powerful committee chairman has to compromise, especially in a Senate divided equally between 50 Republicans and 50 Democrats.
Im the chairman, but even I cant tell you whats going to happen, the Iowa Republican said in an interview Monday from his private office in the Capitol.
At the time he was in the midst of negotiations with Sen. Max S. Baucus, the top Democrat on the committee, on how to shoehorn President Bushs tax-cut priorities into a bipartisan package, which congressional leaders last week reduced by $250 billion from what the White House had proposed.
They were still negotiating Thursday. A final package could be unveiled as early as today, but more likely next week, followed by a committee vote later that week. It is expected to contain scaled back versions of the core components of the Presidents tax priorities: individual rate reductions, estate tax and so-called marriage penalty relief, and child tax credits.
Sen. Grassley is reported to be pushing a compromise to phase out estate taxes, but offset some of the cost by retaining gift taxes on the largest estates.
If the tax is repealed, the banking industry wants to ensure the so-called stepped-up basis which allows the value of an estate to be taxed at the market value at the time the assets are inherited is preserved during the phase-out period. Sen. Grassley said he would retain the stepped-up basis at least to a point so people who dont pay estate taxes are not going to be hit paying the capital gains tax.
The tax bill is not expected to include the unrelated bankruptcy measure, but on Thursday Sen. Grassley was still hoping to insert at least a portion of his cherished provision to boost retirement savings with tax incentives. Among other things, the bipartisan bill would gradually increase tax-deferred contributions to individual retirement accounts from $2,000 to $5,000 and to 401(k) plans from $10,500 to $15,000.
Quite frankly, the pension provisions are a lot more popular than a lot of the rate reductions, he said. People understand increasing IRAs from $2,000 to $5,000. They know immediately the extent to which that will benefit them. When you start talking about reducing rates its kind of fuzzy in their minds the extent to which that benefits them.
The financial services industry is pushing the Grassley bill because it would likely infuse additional money and fee income into the institutions that sell and manage the accounts.
Sen. Grassley conceded that the problem is, if you really wanted to be on the train that left the station for the Presidents tax proposal, you really had to be on board in June of last year, because he is sticking pretty much to what he said in the campaign he wanted to do.
He had talked to White House officials and Treasury Secretary Paul ONeill about including the retirement provisions in the Presidents tax proposal, but was rejected.
Pensions were not denigrated in any way, but were not something they were pushing for, Sen. Grassley said.
If he fails, he is optimistic the retirement savings provision would serve as a sweetener in a second tax package Republicans hope to move soon that will feature small-business tax cuts and an increase in the minimum wage.
Whatever the vehicle, he said, Its my hope it will be enacted this year, either as part of the Presidents tax package or as part of the small-business tax package.
Of equally high priority for the financial services industry is his bill to overhaul the nations bankruptcy laws to require debtors to repay more of their debts. The Senate and House in March passed similar versions of the bill, which is now stalled in a political dispute over the composition of the conference committee that will reconcile them.
Sen. Grassley, a mild-mannered, 67-year-old grandfather of nine, is contemplating less traditional ways to move the bill should leaders fail to form a bankruptcy conference.
On Monday he said he would like to include it in the tax bill as long as it wouldnt keep us from getting the votes to pass the tax bill, which I dont see how it would.
By Thursday, it did not look like he would be successful, but he would not be deterred. If a conference doesnt go, theres a chance bankruptcy will go as part of some other conference committee package.
Yet another way is to staple bankruptcy reform onto an appropriations measure. Last fall we tried to attach bankruptcy to appropriations bills, but the chairmen of the committees handling the spending measures didnt want it done, he said. This chairman, for obvious reasons, would not object to bankruptcy being attached to any bill that Im handling.
Despite Sen. Grassleys support for a bipartisan provision being pushed by industry groups to create special tax-deferred savings accounts for farmers and ranchers, he is not expected to put it into the tax package.
It isnt because of the cost of the program that I dont want it. Its just a case of how many personal items sponsored by individual Senators are going to be in this bill, said Sen. Grassley, the only working farmer in the Senate. Its not a good example for the chairman to set if I want to discourage other members of the panel from pushing for their own pet provisions.
Besides, I think it would be a good candidate for the tax provisions of the small-business tax package, he said.
Another good candidate for the second tax package is liberalizing S corporation qualification requirements so more community banks would be eligible, he said. Such companies pay no corporate taxes and pass their profits directly to shareholders, whose dividends are taxed individually.
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