Congress gives final OK to tax cut - East Valley Tribune: News

Congress gives final OK to tax cut

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Posted: Saturday, May 24, 2003 7:41 am | Updated: 2:00 pm, Thu Oct 6, 2011.

WASHINGTON - Congress on Friday gave final approval to a sweeping tax cut bill, capping a tumultuous legislative journey that tested President Bush’s leadership, left Congress riven by partisan divisions and produced a measure that will reshape the government’s fiscal picture for years.

The $350 billion tax and spending package falls short of Bush’s initial $725 billion, 11-year plan to spur economic growth. But if, as proponents hope, the bill’s many temporary provisions are eventually made permanent, the bill could end up providing a bigger tax cut than Bush sought — up to $1 trillion through 2013, by some estimates.

‘‘This is a trillion-dollar tax cut masquerading as $350 billion,’’ said Sen. Olympia Snowe, R-Maine, who voted against the bill.

For Bush, that is a potential silver lining in a bill that to pass required him to retreat from a core proposal: Eliminating all taxes on dividends. The measure will cut — not abolish — those taxes.

The Senate vote on the bill was 50 to 50; Vice President Dick Cheney, making a rare appearance as the chamber’s presiding officer, cast the tiebreaking tally to pass it. Just a few hours earlier, the House had passed the bill on a largely party-line vote, 231 to 200.

The measure, which provides $320 billion in tax cuts, $20 billion in aid to states and $10 billion in refunds to low income families with children, is expected to be signed by Bush next week.

It includes cuts in income tax rates, tax relief for families with children and married couples, cuts in taxes on dividends and capital gains, as well as new incentives for businesses to invest.

Its effect for millions of taxpayers will be almost immediate: As soon as the bill becomes law, employers will be instructed by the U.S. Treasury to withhold less from workers’ paychecks to reflect lower tax rates.

The broader impact on the economy is harder to predict. But Bush and his allies are hoping that the tax cuts for investment income will give a quick boost to the stock market.

They also hope the income tax cuts will pump consumer cash into the economy, and business breaks will spur job creation.

‘‘This tax relief will help create jobs,’’ said Senate Finance Committee Chairman Charles Grassley, R-Iowa. ‘‘And by creating jobs, it’ll make people feel better about the economy. It’s worth every penny.’’

Proponents acknowledge that they are hoping the resulting tax cuts eventually will add up to more than $350 billion. That is based on the assumption that lawmakers would feel pressure not to allow several of the tax cuts to expire in the next few years, as called for by the bill.

For instance, Grassley said he expected Congress to act before the 2004 elections to make permanent the bill’s provisions to increase the perchild tax credit and to provide a tax break for married couples.

Both provisions are to expire in order to keep the bill’s price down to $350 billion — the figure needed to get it through the Senate. That caused critics to denounce the legislation as a sham.

‘‘The gimmickry in this bill is enough to make an Enron accountant blush,’’ said Senate Minority Leader Tom Daschle, D-S.D.

Friday’s Senate vote was an emblem of how much more partisan the environment has become since 2001, when Bush’s $1.35 trillion tax cut bill passed with support from 12 Democrats. This year, only two Democrats — Ben Nelson of Nebraska and Zell Miller of Georgia — voted for the bill.

Three Republicans — Lincoln Chafee of Rhode Island, John McCain of Arizona and Snowe — voted against it.

In the House vote, 224 Republicans and seven Democrats backed the bill; voting against it were 198 Democrats, one Republican and one independent.

That partisan environment has prevailed from the start of Bush’s drive for a tax cut in January, forcing him to try to push the bill through Congress by relying almost exclusively on Republicans.

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