The tax-writing committee of the House of Representatives approved, on a party-line vote, a US$100 billion economic stimulus bill that would eliminate the corporate alternative minimum tax, change depreciation rules to encourage business investment and cut the capital gains tax rate.
The House Ways and Means Committee voted 23-14 for the bill, after a debate in which Democrats and Republicans blamed each other for the breakdown of bipartisan negotiations.
Democrats said several provisions, such as a US$21 billion international tax break for global financial companies such as Citigroup Inc and American International Group Inc, won't stimulate the economy quickly.
The bill's sponsor, Republican Chairman Bill Thomas, disagreed, saying the bill is "big enough to make a difference."
Thomas's bill builds on proposals by President George W. Bush, which aims to boost investment by businesses and individuals while also offering aid for low-income workers.
Thomas says businesses need incentives to buy equipment and facilities to spur production. Economic growth fell to 0.3 percent in the second quarter, the lowest in eight years, and economists say a recession is likely after the Sept. 11 terrorist attacks.
To entice individual investment, Thomas' proposal would effectively cut the long-term capital gains rate to 18 percent from 20 percent for most investors and boost the amount of capital losses they can deduct to US$5,000 from US$3,000 beginning in 2002.
Democrats rejected the measure and vowed to block it in the Senate. The House bill "is so far removed from the principles that I felt we had agreed to" with the White House and congressional leaders of both parties "that I don't know where to begin," said Senate Majority Leader Tom Daschle.
After the House panel's vote, top Treasury Department tax official Mark Weinberger called the tone of the debate "at times not preferable" but handed the bill a qualified endorsement.
"The package goes a long way towards the president's objectives," Weinberger said.
University of Michigan Business School professor Joel Slemrod supported the Democrats' argument, saying several expensive provisions, such as the international tax break and the capital gains cut, won't stimulate the economy.
"It has got a lot of things that people wanted before Sept. 11 and the recession that aren't stimulus-related," he said.
"I'm just surprised to see this set of proposals packaged as a stimulus."
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