Bush Signs $70B Tax Cut Package

In a political victory for Republicans, President Bush signed the sixth tax cut in the past six years yesterday, in a Rose Garden ceremony.

In both houses of Congress, the debate over the bill followed partisan lines -- Republicans credited the tax cuts, first enacted in 2003, as the impetus to a surging economy and booming federal tax revenues, while Democrats spoke strongly against the bill, suggesting that the monetary benefits of the cuts on capital gains and dividends flowed directly to the super-wealthy.

But both parties supported the single costliest part of the bill, a $34 billion initiative to provide relief to approximately 18 million middle-class taxpayers who would have been hit by the alternative minimum tax.

Finance Committee chairman Charles Grassley, R-Iowa, has said that another bill containing widely backed cuts favored by Democrats would advance out of committee soon as part of a follow-up bill. The bipartisan bill is said to contain another $22 billion in tax breaks -- including preserving tax deductions for state and local sales taxes, a tuition tax deduction, a tax break for teachers who buy their own school supplies, and a research and development tax credit for businesses.

Middle-income couples with children will see their income tax rates cut, their tax credits for children doubled, and income tax rates adjusted to favor marriage. Affluent investors and savers are also winners, seeing rates on most capital gains reduced from 20 percent to 15 percent, rates on most dividends reduced to 15 percent, and limits on tax-protected individual retirement accounts and 401(k) plans raised.

The Senate passed the bill last week on a 54-44 vote, with just three Republicans -- Olympia J. Snowe of Maine, Lincoln Chafee of Rhode Island and George Voinovich of Ohio -- voting against the bill, and a trio of Democrats -- Ben Nelson of Nebraska, Bill Nelson of Florida and Mark Pryor of Arkansas -- voting in favor.

A day earlier, the House passed the bill by a 244-185 vote, with just two Republicans -- Sherwood Boehlert of New York and Jim Leach of Iowa -- voting against the measure and 15 Democrats voting in favor.

Previously on WebCPA:

$70B in Tax Cuts Move Closer to Passage (May 11, 2006)

Negotiators Agree to Broader AMT Relief (May 4, 2006)

Gains for Rich Come from Investment Tax Cuts (April 6, 2006)