Snowe's Fiscal Sense

By: Editorial

Having set up cuts worth billions of dollars in social programs - foster care, Medicaid, food stamps, Temporary Assistance for Needy Families - Congress now begins debate on tax breaks for the rich. The program cuts, Republican leaders claim, were needed to help balance the budget, though over time they will make it worse. Several of the tax cuts, however, will worsen it immediately, are largely unnecessary to extend now and ensure the poor and elderly will be at a greater disadvantage over time.

Currently, the one Republican who stands between this agenda and fiscal sanity is Olympia Snowe, on the Senate Finance Committee and the key vote on a $70 billion tax-cut reconciliation package. Sen. Snowe has a pressing agenda of her own: money for heating fuel for the poor. This creates what some mistakenly see as an opportunity to bargain.

Several of the tax cuts under consideration would pass by an overwhelming number of senators. These include breaks for college tuition, research and development and an exemption to the alternative minimum tax, all of which would expire this year unless extended. But two other cuts - for capital gains and dividends, which don't start expiring until 2008 - would cost $50 billion over five years, with more than half the cut going to households with annual incomes of more than $1 million.

The chairman of the Senate Finance Committee, Charles Grassley of Iowa, wants his committee to prepare a bill for the full Senate this week. Committee Democrats oppose the capital gains and dividends cuts; Republicans support them, with the exception of Sen. Snowe, thereby creating a deadlock. Considering the damage Congress may do in conference over the spending package, a tax cut aimed at the wealthy now seems like salt in the wounds of the poor, besides worsening the deficit when much more money is needed for the wars in Iraq and Afghanistan and for Katrina relief.

For the last couple of months, both Sens. Snowe and Susan Collins have been trying to bargain for additional funding for the Low Income Home Energy Assistance Program - the subsidy to help pay heating bills. The program is seen in Congress as Northeast welfare and is regularly underfunded or rejected. This year, of course, is especially difficult but so far both houses have blocked re-peated attempts to increase funding.

Sen. Snowe's latest try is a $500 home-energy tax credit for families with incomes less than $100,000. The relatively high qualifying income might broaden the tax's appeal, but it would not help those who pay little or no taxes even in the unlikely occurrence that it survived the House-Senate conference. Activists fear the senator would trade a vote on the tax-cut bill for support of her energy tax credit. She has proved herself to be a better negotiator than that, however.

The capital gains and dividend tax cuts expand the deficit, which must worry the financial markets, without doing much for the economy. Extending them while at the same time cutting programs to the poor -indeed leaving less revenue in the future for programs -is not just unaffordable but unacceptable.

The outcome of whether the cuts are extended now rests with Sen. Snowe because they will pass if they make it out of committee. She has been standing firm for fiscal sense despite intense pressure so far. It's a posture she should hold.