INSIDE WASHINGTON/Locals cautious about Bush tax plan

As Congress struggles to hash out the details of President Bush’s $1.6 trillion tax cut proposal, Washington representatives looking after city and county interests are raising a yellow caution flag over the size of the plan. There is a growing concern among some city and county officials that Bush’s across-the-board tax cut relies too much on projected surpluses, and they fear that a dip in the economy could adversely affect the future funding needs of local and state governments.

“It certainly has long range fiscal and problematic implications to it,” says Ralph Tabor, associate legislative director and tax and finance specialist for NACo. “If we have any kind of a recession, we are going to have an increase in social services costs and health services costs.”

Congressional Democrats are seizing on Bush’s reliance on projected surplus numbers as an argument to reject the president’s plan in favor of the more conservative tax cut package they are promoting. The remaining surplus dollars in the Democratic proposal would be earmarked for paying down the debt and funding domestic programs.

“We don’t know what the surplus will be like 10 years from now any more than we know what the weather will be like 10 years from now,” says Senate Minority Leader Tom Daschle (D — S.D.). “If the economy grows just eight-tenths of 1 percent slower than projected, the size of the surplus drops $4 trillion. If that happens, it could drive our economy right off the cliff. We could be looking at a return to deficits and high interest rates or massive budget cuts, or both, because of Bush’s tax cuts.”

Congressional Republicans, on the other hand, argue the projected surplus dollars are really overpayments made by the taxpayers and say they are entitled to get their money back. Additional dollars in taxpayer hands, GOP leaders say, would help spur the nation’s economy, now in a downturn.

“What we are talking about is the American people being able to keep more of their money,” says Senate Majority Leader Trent Lott (R — Miss.). “It’s their money. It’s not the Washington government’s money.” Lott claims the tax cuts will boost the economy by creating jobs.

Groups such as the National League of Cities, National Association of Counties and U.S. Conference of Mayors have not taken formal positions on Bush’s plan, hoping instead to work closely with the new White House on the development of a comprehensive domestic agenda. However, the lack of a budget proposal presented by the White House before the details of Bush’s tax cut were released last month has some local officials worried.

“To make a responsible decision about what the tax cut will be over the next 10 years requires a fairly detailed blueprint and budget request from the administration,” says Cameron Whitman, NLC’s director of policy and federal relations. “None of us has the context we need to know whether this is a responsible decision.”

Whitman says if the tax cut is signed into law then federal funding for such things as building affordable housing, economic development, job training, transportation expansion and water infrastructure improvements, among other things, would likely dry up. “We are very concerned that there be some of the surplus dedicated to some major infrastructure investments that have absolutely got to be made,” she says.

USCM spokesman Jubi Headley says the conference does support some components of the Bush tax plan. However, he notes, USCM is monitoring the plan carefully to make sure cities’ concerns are addressed.

The battle over taxes is expected to continue for months. Republicans hope to make significant progress on their package by August when the traditional month-long Congressional recess takes place.

The author is Washington correspondent for American City & County.