The House easily passed a compromise tax cut Saturday that will provide broad tax relief over the next decade, starting this year when taxpayers will receive some 95 million refund checks. Single taxpayers will get up to US$300 and married couples US$600.
The 240-154 vote sent the bill to the Senate, which was also meeting in a rare Saturday session. Twenty-eight Democrats joined every voting Republican in supporting the package.
Senators were expected to give the 10-year, US$1.35 trillion measure final approval, meeting President George W. Bush’s goal of winning passage by the Memorial Day holiday on Monday.
“This morning, we’re returning some of the taxpayers’ money,” said House Ways and Means Committee Chairman Bill Thomas, a California Republican and one of the bill’s chief authors.
The legislation, a blend of Bush’s proposals and those from Congress, cuts income taxes across the board, abolishes the estate tax, eases the marriage penalty, and doubles the US$500 child tax credit. It also includes breaks for education and retirement savings.
In a statement Friday, Bush said the agreement means “American taxpayers will have more money in their pockets to save and invest and the economy will receive a well deserved shot in the arm. Tax relief is the centerpiece of our American agenda, and I look forward to signing it into law.”
During floor debate Saturday, many House Democrats criticized the bill as an unwise drain on projected budget surpluses needed for other priorities, such as education and welfare. They also contended that too great a share of the tax cuts would go to wealthier Americans.
“You have a little bit of sugar hiding a pot full of fiscal irresponsibility,” said Michigan Democrat Rep. Sander Levin.
The deal was reached by two Democrat lawmakers and two Republicans on Friday.
“Democrats fully participated in this process,” said Democrat Sen. Max Baucus of Montana. “This is a very good result.”
Under the plan, the Treasury Department would begin mailing out lump-sum checks starting this summer to reflect the first year of a new 10 percent income tax rate on the initial US$6,000 of an individual’s income, US$12,000 for married couples.
Individuals would get up to a US$300 refund this year. Single parents would get up to US$500 and married couples up to US$600.
The new 10 percent rate would remain in effect in later years. The top 39.6 percent income tax rate would drop to 35 percent by 2006, with most other rates falling by 3 percentage points. The first installment of the reductions would take effect July 1. The 15 percent rate, however, remains the same.
Total tax relief for 2001 would amount to about US$55 billion, said White House chief economic adviser Lawrence Lindsey.
Although the budget passed by Congress envisioned an 11-year tax cut, the compromise assumes that the tax cuts end in 2010 so that all the relief would fit under the US$1.35 trillion ceiling. The provisions also would end in 2010 unless renewed by a future Congress.