Grassley Facing Big Test

Facing his biggest test yet as the new Finance chairman, Sen. Chuck Grassley

(R-Iowa) is already taking advance fire from conservative activists who fear that he has been far too compromising in negotiating the tax-cut package.

Led by the Club for Growth and the Heritage Foundation, a loose coalition of conservative think tanks and anti-tax groups have lashed out at Grassley for considering deals with Democrats even before this week’s committee markup or a floor fight.

The conservative groups have issued warnings that anything less than complete victory on their top priorities – dropping the top income tax rate from 39.6 to 33 percent and completely eliminating the estate tax – would be a failure, particularly this early in President Bush’s administration.

“It will be a hollow victory if Bush doesn’t get those two major components, ” said Stephen Moore, president of Club for Growth, the group of economic conservatives that riled GOP circles last spring by backing right-wing challengers in primaries.

“It will be a victory, but a victory for Tom Daschle, not George W. Bush,” Moore said in reference to the Democratic Minority Leader from South Dakota.

Moore and other conservatives were particularly upset Friday when Grassley unvailed his “chairman’s mark” for the plan, which only reduced the top rate to 36 percent.

However, Grassley said the activists simply aren’t dealing with the reality of a 10-10 Finance Committee and a 50-50 Senate, where there is little chance of forcing through partisan legislation.

“I’m not compromising anything except to give the taxpayers one-and-three- 10ths trillion dollars in tax relief,” Grassley countered.

With the Senate passage last week of the budget outline, providing $1.25 trillion in tax cuts over the next 10 years and another $100 billion in a stimulus package of two-year tax cuts, Grassley plans to begin marking up the precise details of that package early this week, potentially passing the plan out of Finance by midweek.

Ever since the Senate failed to pass Bush’s original $1.6 trillion tax-cut plan during the budget debate last month, Grassley and Sen. Max Baucus (D- Mont.), the Finance panel’s new ranking member, have been negotiating over how to fit the pieces of Bush’s proposals into the $1.35 trillion alternate plan.

Grassley admits that he has doggedly pursued a bipartisan approach to give the tax plan as much political cover as possible, signaling he is willing to yield to Democratic and moderate Republican demands that the top-bracket tax cut be trimmed and that the estate tax not be completely eliminated.

“Everyone knows I would prefer 33 percent, but I want to reduce taxes,” Grassley said of top-bracket reduction. “I haven’t seen the votes for 33 percent.”

Still, conservative activists allege that Grassley is caving in too soon in the process, perhaps putting the protection of the interests of his committee ahead of the ultimate objective of getting the lowest tax deal possible.

“What bothers us is the pre-emptive surrender,” said Dan Mitchell, a senior fellow on tax issues at the Heritage Foundation, who called Grassley’s early bipartisan approach “incredibly incompetent.”

Mitchell and Moore are spearheading an effort to turn up the political heat on Grassley, circulating a letter among about 20 conservative groups, including the National Taxpayers Union and Citizens for a Sound Economy, blasting any attempt to give in on their top two priorities.

Their approach mirrors efforts that began at the White House last week, when Bush held an event geared toward getting small-business owners to lobby Congress on the 33 percent proposal. But Mitchell and Moore have been much more focused in their campaign, directing their ire specifically at Grassley, a self-proclaimed pragmatic conservative whose reputation for deal-making has never sat well with some activists on the right.

Moore spent part of last week on the phones with conservative talk radio shows in Iowa, encouraging Grassley’s constituents to push him on the issue.

Mitchell said it appears that Grassley is trying to protect Finance’s political turf in a bid to avoid losing control over taxes, which occurred last year when the panel wasn’t able to pass major legislation and Majority Leader Trent Lott (R-Miss.) moved key issues straight to the floor, bypassing the committee.

Up against 10 Democrats on Finance, as well as Sen. Jim Jeffords (R-Vt.), who has opposed Bush’s tax and budget plans, Grassley may not be able to move a package out of his committee unless he compromises.

“Grassley has adopted the policy where he’s trying to protect the committee first, party and policy second,” Mitchell said. “He’s caught between a rock and a hard place.”

Still, the activists say they want Grassley to force the Democrats to take some tough votes rather than put together a bipartisan package that sets the top bracket at 36 percent. This creates the possibility that after a floor fight the figure could creep up to 37 percent.

Mitchell, who once worked for Finance under then Chairman Bob Packwood (R- Ore.), said he would prefer that the committee be bypassed and the issue be fought out on the floor. “Force them to take a vote,” he said.

Grassley believes he is working toward the same goal as the conservatives, just in a more realistic, conciliatory way. “He’s trying to get as close to 33 percent as he can,” said Jill Kozeny, his spokeswoman.

Lott said Grassley has indicated to him that he believes that the best approach is to go through Finance and build bipartisanship.

“He would like to do that, and I would prefer to do that,” said Lott, who, as a Finance member, will have a front-row seat for this week’s battles.

“We have to go through a process,” he added. “Hopefully, it will be bipartisan all the way.”

Committee Democrats are adamantly opposed to giving top-income earners such a huge tax break, from 39.6 to 33 percent, which some liberal groups estimate would eat up one-fifth of the entire tax-cut plan. “There’s going to have to be some sort of give and take,” Baucus said.

“In order to get a tax bill out of the Finance Committee, there’s going to have to be compromise,” said Sen. John Breaux (D-La.), a key moderate on budget and tax deals. “Otherwise, there’s not going to be an agreement. That’s not rocket science.”

Acknowledging they still might prevail in a conference committee between the House and Senate, conservative activists are pushing to get as good a deal as possible on the Senate side in order to have the best leverage in crafting the final details.

But Moore said those in his coalition believe that they are losing ground, pinpointing Grassley as the cause, though he’s just four months into his chairmanship.

“People are fearful,” he said. “It’s white-knuckle time, and we’re all nervous about losing the key components of this tax bill, which we’ve been working on for the last six months.”

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