Senate Agrees to Extension Of Tax Cuts, Mostly For Rich
By Edmund L. Andrews
THE NEW YORK TIMES
The Senate voted 54-44 on Thursday to pass almost $70 billion in tax cuts, mostly for the nation’s wealthiest taxpayers. The action ensures that virtually all of President Bush’s tax cuts will be locked in place until after the next presidential election.
The measure, which the House passed on Wednesday, would extend Bush’s tax cuts on stock dividends and capital gains until 2010, and shield about 15 million affluent families for one year from an increase in the Alternative Minimum Tax.
The vote was a significant victory for Bush and beleaguered Republican leaders, who had viewed the tax cuts on stock market profits as a defining party issue and had credited them with jump-starting economic growth and reducing unemployment over the last three years.
“We’re finally here; we have a deal,” Sen. Charles E. Grassley of Iowa, chairman of the Senate Finance Committee, declared with evident relief on the Senate floor. “More importantly, the American taxpayer has a deal. A deal that is long overdue.”
But even as Senate Republicans celebrated, they failed to reach agreement with House Republicans on scores of other popular tax breaks, including tax deductions for college tuition and a savings credit for low-income people that expired last year.
Democrats charged that the tax bill focused almost entirely on cuts for wealthy investors and that it allowed programs aimed at ordinary citizens to languish.
“There is little in this bill to be proud of,” said Sen. Max Baucus, D-Mont. “Working people have been left behind.”
House Republicans, meanwhile, remained in disarray over a budget plan for next year. After vowing earlier Thursday to vote on the plan, which was to have been passed on April 15, House leaders postponed the vote after failing to reach agreement with Republican moderates who wanted $3 billion more for health and education.
Even if House Republicans pass a budget plan later this month, their measure will have little practical importance because it probably will not be reconciled with a very different plan passed earlier this year by the Senate.
The tax bill, which Bush is expected to sign as early as Friday, could set the stage for budgetary heartburn in the years ahead.
Virtually all of President Bush’s tax cuts — rate reductions for individuals, a bigger child tax credit, the elimination of estate taxes and the tax cuts for stock dividends — will expire simultaneously at the end of 2010.
Renewing all those tax cuts at the same time would cost hundreds of billions of dollars a year, posing excruciating budget choices for the next president as the nation’s baby boomers become eligible for billions of dollars in Medicare and Social Security benefits.
In addition, lawmakers merely postponed dealing with huge problems surrounding the Alternative Minimum Tax, a parallel tax that was originally aimed at millionaires but is not adjusted for inflation and is set to engulf millions of middle-class families.
Preventing an expansion of the alternative tax in 2007 would cost more than $40 billion, and the costs increase each year after that.