UPDATE — An RSC spokesman correctly points out that House Republicans are still calling for the tax cuts to be made permanent, and have not dropped that as a priority issue.

The tax cuts have been dropped from the current negotiations over the stimulus package.

On Friday, Mr. Hensarling, in a statement on the economic stimulus package, said that "nothing would help our economy more than making permanent the tax relief that is soon to expire."

The stimulus package released by the RSC today did not include the tax cuts, but the original post should have made clear that permanent tax cuts are still a top priority for GOP fiscal hawks.

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The Republican Study Committee today issued their own economic stimulus package, in which they dropped demands that President Bush's tax cuts be made permanent.

Also today, House Republican leaders indicated which Democratic demands will be sticking points in negotiations.

A House Republican source said that Democratic desires to increase Medicaid funding, aid to states and infrastructure funding are all "nonstarters."

Democrats also are pushing for including non-income taxpayers in any tax rebate.

The RSC, a group of more than 100 fiscally conservative House Republicans led by Rep. Jeb Hensarling of Texas, said last week that any stimulus package needed to make the president's 2001 tax cuts permanent beyond 2010.

But in the proposal released today, the tax cut demand was dropped.

"The Democrats took it off the table," said a source inside the RSC.

The RSC is still calling for four specific business-friendly measures: full, immediate expensing of assets; a reduction in the corporate tax rate, from 35 percent to 25 percent; elimination of the capital gains tax on inflation; and reduction of the capital gains rate, from 35 percent to 15 percent.

"The best way to encourage an economic turnaround, help preserve jobs, and spur widespread economic growth is to ensure that job-creators face a lower tax and regulatory burden," said Hensarling spokesman Brad Dayspring.

The Club for Growth is calling for similar measures.

Here is a summary of the RSC's measure, which they're calling the "Economic Growth Act."

1) Full, Immediate Expensing. The bill would allow all businesses to immediately expense—or deduct on their tax returns—the costs of assets (including buildings) they purchase for their business in the year that they buy such assets (“Section 179” expensing). Under current law, businesses can only take such deductions in pieces, over several years. This provision, by accelerating the expensing, would encourage the purchase of assets with which to grow a business.

2) Significant Reduction in the Top Corporate Tax Rate. The bill would immediately cut the top corporate income tax rate from 35% to 25%, aligning it with the average rate in the European Union. This provision, by allowing businesses to keep more of the money they earn, would encourage the expansion of businesses, the hiring of more workers, and an acceleration of investment, while making American companies more competitive internationally.

3) End the Capital Gains Tax on Inflation. The bill would index for inflation the cost basis used when calculating the capital gains tax on assets acquired before the end of 2008. Under current law, the capital gains tax is based on the difference in the original purchase price of the asset and the sale price of the asset. However, some of this difference, or “gain,” can be attributed to inflation. This provision, by effectively reducing the amount of a gain that is taxable, would encourage the movement of capital in 2008 and spur voluminous economic investment.

4) Sharp Reduction in the Capital Gains Rate for Corporations. The bill would allow corporations to benefit from the 15% capital gains rate. Under current law, individuals pay a top capital gains rate of 15%, but corporations are subject to a 35% top rate. This provision, by encouraging corporations to sell unwanted assets, would unleash funds and materials with which to create jobs and grow the economy.

— Jon Ward, White House correspondent, The Washington Times