Republicans agree stimulus to pass in February

WASHINGTON (Reuters) - U.S. congressional Republicans predicted on Friday that legislation to boost the sagging economy would pass by mid-February, but pressed President Barack Obama to support more tax cuts in the plan.

Republicans complain that $550 billion of the Democrats' $825 billion stimulus package was government spending, with only $275 billion in tax cuts, which they say would better spur job growth and pull the economy out of a yearlong recession.

Both sides said on Friday they expected to get a stimulus package for Obama to sign by his mid-February deadline. But they continued to disagree on details, with Republicans saying their attempts to make changes have been thwarted.

Amid Republican complaints that it would take years to spend a large portion of the funding, the Obama administration released a letter that said they wanted at least 75 percent of the money spent by September 30, 2010.

"Everybody believes that government's action is necessary," Senate Minority Leader Mitch McConnell said in a speech to the National Press Club. "It will happen and I think it will happen before the anticipated week off in February."

He questioned whether their ideas would be adopted in the Democratically controlled Senate and House, but said he believed Obama was open to them. "We will see, as we go along, how many of them are incorporated."

Republicans handed their alternatives to Obama at a bipartisan White House meeting and planned to press their ideas when the package comes to a House vote on Wednesday. Obama will visit Capitol Hill again next week to push for the package.

TAX BREAKS

The Democratic tax cut plan would direct benefits more toward lower-income workers, even those who do not pay income taxes, while the Republicans would help all taxpayers.

The Republicans do not know yet the cost of their plan.

Republicans have so far failed to significantly change the legislation despite offering amendments to boost tax cuts and slash government spending.

The Republican proposals include cutting the lowest two income tax brackets, from 15 percent to 10 percent and from 10 percent to 5 percent, while also offering small businesses a tax deduction equal to 20 percent of their income.

Democrats have proposed a tax cut of $500 for individuals earning up to $75,000 and $1,000 for families earning up to $150,000. Republicans said their plan would give families an average of $1,700 in savings.

The Republicans also proposed helping those who have lost their jobs by eliminating taxes on unemployment benefits. They also urged that the legislation bar higher taxes to pay for the anticipated increased spending.

Senate Finance Committee Chairman Max Baucus unveiled the Democrats' draft of their tax stimulus bill to be considered next week. Totaling $275 billion in tax breaks and incentives, it had many similar elements to the House package and included $30 billion in tax cuts and incentives for the energy sector.

The top Republican on the panel, Sen. Chuck Grassley, said he would try to include a fix to the Alternative Minimum Tax, which was designed to ensure wealthy people did not take advantage of so many tax breaks that they paid no taxes. But more middle income families are being hit by it.

(Additional reporting by Richard Cowan, Thomas Ferraro, and Donna Smith, editing by Alan Elsner)