Senate passes $70 billion tax cut bill

WASHINGTON - The Senate gave final approval Thursday to a $70 billion election-year package of tax cuts that will extend lower rates for investors and also save billions for families with above-average incomes.

The Senate passed the measure by a 54-44 vote, clearing it for President Bush’s signature.

The legislation provides a two-year extension of the reduced 15 percent tax rate for capital gains and dividends, currently set to expire at the end of 2008.

It also will extend for one year recent changes to the alternative minimum tax — originally aimed at making sure the wealthy pay at least some taxes — to prevent it from hitting more upper middle-income families.

It is now common for taxpayers, especially those with families in high-tax states, to pay the AMT on incomes of $100,000 and more.

The bill also will extend for two years provisions sought by small businesses to let them write off up to $100,000 in investments in equipment and other expenses.

Partisan debate
The debate followed partisan lines, with Republicans eagerly crediting the tax cuts, first enacted in 2003, with a surging economy, millions of new jobs and booming tax revenues. Democrats overwhelmingly opposed the bill, saying its tax cuts on capital gains and dividends will flow mostly to wealthy.

Just three Republicans — Olympia J. Snowe of Maine, Lincoln Chafee of Rhode Island and George Voinovich of Ohio — voted against the bill. Democrats Ben Nelson of Nebraska, Bill Nelson of Florida and Mark Pryor of Arkansas voted in favor.

Republican Gordon Smith of Oregon originally registered a “nay” vote but changed to “aye” just before the tally was announced.

The bill, the result of months of negotiations between the two chambers, was passed by the House on Wednesday.

Amid dropping support, a win for Bush
President Bush, who has made tax-cutting a central plank of his presidency and is looking to revive support for Republicans before congressional elections in November, was expected to sign it with great fanfare.

It is a rare victory for Bush, who is seeing his popularity fall in public opinion polls, and who has enjoyed few wins in Congress since his proposed Social Security overhaul was derailed last year.

The bill, which will cost the treasury $70 billion over five years, extends for two years a 15 percent tax rate for dividends and capital gains. Those reduced rates for investment income were the centerpiece of Bush's 2003 economic package and were set to expire at the end of 2008.

Democrats claim bill coddles the rich
Democrats supported the AMT measure, but Sen. Max Baucus of Montana said the bill was skewed too much in favor of the wealthy and left out other expired tax breaks that would help teachers and families pay for education.

"Working families have been left behind," Baucus said during the Senate debate. "Congress has chosen ideological wants over America's needs."

Grassley said those tax measures and others would be part of a second tax cut package still being negotiated between the House and the Senate.

The House debate divided starkly along partisan lines, with Republicans crediting the tax cuts, first enacted in 2003, with a surging economy, millions of new jobs and booming tax revenues. Democrats countered that the tax cuts are tilted in favor of wealthy investors, that the economic benefits are not as great as advertised and that they make the budget deficit worse.

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