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Senate Passes
$350 Billion Bush Tax Cut
2:06
AM EDT,May 16, 2003
By ALAN
FRAM, Associated Press Writer
WASHINGTON -- A plan to
temporarily erase taxes on corporate dividends cleared the
Senate by the slimmest of margins, buoying President Bush's
hopes for the keystone of his proposal to juice the economy
despite its white-knuckle trip through Congress.
By a
51-49 vote late Thursday, the Senate approved a bill cutting
individual income taxes and some business levies by $350
billion through 2013. Before passage, senators voted to slice
the dividend tax in half this year, then suspend it completely
for three years. That roll call was 51-50, with Vice President
Dick Cheney arriving to cast the tie-breaking vote.
Overall,
the measure would cut taxes by nearly $420 billion -- and
provide $20 billion in spending for Medicaid and other
programs for financially ailing states, while raising other
levies and fees by almost $90 billion.
The bulk of the
bill moves up cuts in income tax rates passed by Congress two
years ago, increases the child tax credit to $1,000 and gives
married couples a tax break. It also lets small businesses
expense more of their equipment investments.
President
Bush praised the Senate "for its bipartisan passage of a jobs
and growth package that includes all of the components of my
original plan."
"Jobs are on the line, and I look
forward to working with the full Congress to pass a robust
economic growth plan," Bush said in a statement after the
Senate vote. "I call on Congress to resolve their differences
quickly so I can sign a bill that will help create jobs, boost
take home pay and spur economic growth."
Bush sought
the complete elimination of the levies stockholders pay on
dividends, a $396 billion plan that was the heart of his $726
billion tax-cutting proposal. But GOP moderates nervous about
burgeoning federal deficits forced Republican leaders in both
chambers to shrink the overall tax cut, and the fate of the
dividend reduction was often in doubt.
Sens. Ben Nelson
of Nebraska and Zell Miller of Georgia were the only Democrats
to vote for the dividend plan, which was authored by Senate
Budget Committee Chairman Don Nickles, R-Okla. Sens. John
McCain of Arizona, Lincoln Chafee of New Hampshire and Olympia
Snowe of Maine were the only Republicans
opposed.
Democrats said the proposal would help mostly
the rich and swell budget deficits, and said the tax bill's
price tag was artificially low because Republicans would never
really let the dividend tax come back.
"This is absurd.
This is irresponsible," said Sen. Max Baucus of Montana, top
Democrat on the tax-writing Senate Finance
Committee.
The price tag on the dividend plan was $124
billion. A study by the liberal-leaning Center on Budget and
Policy Priorities said if the dividend tax were erased
permanently, the overall Senate bill would cost $660 billion
over the decade.
The vote on final passage was
identical to the vote on the dividend amendment except that
Sen. Evan Bayh, D-Ind., also voted yes. In a written
statement, he said he supported it to take strong action to
spur the economy, but would oppose a final House-Senate
compromise if it contained the same budget gimmicks or grows
larger.
Snowe and Sen. George Voinovich, R-Ohio, had
pressured Senate GOP leaders to limit the tax measure to $350
billion. But with support from three Democrats, Snowe's vote
was not needed at the end.
"This is a risky, highly
speculative and ill-conceived approach," Snowe said of the
dividend language.
The House completed a $550 billion
tax bill last week that would lower the current maximum tax
rates on dividends and capital gains to 15 percent. Those top
rates are now 38.6 percent and 20 percent, respectively, and
House leaders indicated they prefer their approach.
"If
the dividend is 50 percent and then nothing, and all of a
sudden it is back to 100 percent or whatever it is, my feeling
is that it does not solve the problem," said House Speaker
Dennis Hastert, R-Ill.
Even so, one administration
official speaking on condition of anonymity said the White
House was hoping the Senate version completely suspending the
dividend tax would survive. It was becoming less likely,
however, that the House and Senate would complete a final
compromise by the time Congress begins its Memorial Day recess
next Friday.
In more than 12 hours of voting Thursday,
senators cast roll call votes on 29 amendments, rejecting
nearly every one.
They approved one by Finance
Committee Chairman Charles Grassley, R-Iowa, giving rural
states more Medicare money. They passed another by John
Ensign, R-Nev., cutting taxes on business profits earned
abroad and brought back to the United States to 5 percent from
35 percent for one year.
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