TAX CUT MONTE

If reducing the tax on dividends doesn’t save the economy, increase the nation’s general happiness and whiten everyone’s teeth, it will not have been worth the contortions and arguments Congress suffered in forcing it into the House and Senate tax cut packages. It’s there in the committee bills, in much smaller versions than what President Bush wanted and, in the Senate, with offsetting tax increases to pay for it. But it has created enough acrimony between houses to suggest further unpleasant behavior when the bills are reconciled.

The $350 billion Senate tax cut includes the elimination of the tax on the first $500 in dividends plus 10 percent of the remainder for the first five years and 20 percent for the next five. It speeds up the child tax credit from $600 to $1,000, reduces income tax rates and dumps the marriage penalty. The business expensing allowance is tripled to $75,000. An adamant Sen. Susan Collins worked with her party’s leadership to get fiscal relief for the states; $20 billion has been included for that, and on Tuesday Sen. Collins is expected to propose that half the relief be dedicated to Medicaid rate increases.

Sen. Olympia Snowe could launch her 2006 campaign from the attack ads various interest groups have run on radio and television against her principled stand on not bloating the deficit for everyone to get tax cuts that benefit only a few. Recent polls in Maine have shown overwhelming support for her position and against the slant of the ads, a position strengthened by the shallowness of the ads’ arguments. The senator has been at the center of this debate for months, has withstood immense pressure from other Republicans and largely won the fight. So far.

The key now is for senators to persuade House members, who passed their bill Friday, to adopt the $350 billion plan. The Senate plan matters more than the House version because House members count on the senators to act like the grownups and not do something like include false sunsets for tax breaks that will never end or pass cuts that will cost the government $1.1 trillion, as its version does, according to the Center on Budget and Policy Priorities. Still, House members will be tempted to find ways to force Senate Finance Chairman Charles Grassley to break his pledge to limit the tax cut or toss in more of the phase-ins, sunsets, double-counted offsets to hide the size of the deficit they are creating.

The votes of Maine’s senators are likely to be crucial in the final version of the proposal and the pressure will be on them again to not stand in the way of what party leadership wants. They should stand in the way and remind their colleagues that the point of the tax cut is immediate economic stimulus and that the place to put the money is where it will be spent quickly.