Congress Extends Middle-Class Tax Cuts

WASHINGTON – Legislation extending three popular middle-class tax cuts (search) for the rest of the decade sailed through Congress by lopsided votes in both the House and Senate (search), giving President Bush a major legislative victory on his signature economic issue, tax relief.

Many Democrats complained during debate Thursday that the majority Republicans who control Congress should have offset the lost revenue to keep the nation's soaring deficits from getting worse.

But in the end large numbers of Democrats supported the package, something that Republican tax-cut proponents had counted on occurring with a congressional election only 40 days away.

The $145.9 billion tax cut package was approved in the House by a 339-65 vote, with 125 Democrats joining 213 Republicans and one independent in voting for the proposal. In the Senate, the measure passed by a 92-3 vote.

While no House Republicans voted against the tax cuts, the three senators objecting included two Republicans, Sens. Lincoln Chafee (search) of Rhode Island and Olympia Snowe of Maine, who joined Sen. Ernest Hollings, D-S.C., in voting "no." All three have been critical of the government's inability to get soaring deficits under control.

"I for one am very reluctant to saddle future generations with the bill for this fiscally ruinous policy," Chafee said in a statement.

Bush, whose campaign was hoping for a high-profile victory on taxes in the closing weeks of the presidential race, praised the congressional votes and said his tax relief was "putting more money into the hands of the American people and helping to grow our economy."

Sen. John Kerry, his Democratic opponent, said he also supported the middle-class tax cuts. "Millions of American families are being squeezed by the weak Bush economy, falling incomes and rising health costs," Kerry said, adding that as president he would roll back Bush's tax cuts for the wealthiest families and use the savings to invest in health care and education.

The tax package Congress passed will affect an estimated 94 million Americans, mainly through its provision to extend a broader 10 percent tax bracket, which helps reduce taxes for virtually all taxpayers. The package also keeps the per child tax credit at $1,000 and retains the provisions providing married couples relief from the so-called marriage penalty.

The package extends the child credit for five years, the marriage penalty relief for four years and the expanded 10 percent tax bracket for six years.

When added to the tax relief Bush persuaded Congress to pass in 2001, all of the provisions will have the effect of keeping the popular provisions on the books through the rest of the decade. After 2010 all of the tax cuts are due to expire.

Bush, in the statement released by the White House, said Thursday's congressional action "brings us one step closer to making the tax relief permanent."

The price tag for the individual tax relief in the newly passed package was $131.4 billion over 10 years. In addition, Republicans added provisions to extend a group of 23 expiring tax provisions at a cost of $12.97 billion. The biggest item in this group was $7.56 billion to extend until the end of 2005 a tax credit to businesses for research and development.

Opponents, however, zeroed in on these proposals as an example of corporate welfare.

Rep. Rahm Emmanuel, D-Ill., said it was ironic that Congress was passing the corporate tax breaks one day after the liberal-leaning Citizens for Tax Justice issued a report saying that 82 of the country's largest corporations paid no federal income tax for at least one year out of the past three.

With passage of the individual tax measure, Congress has only one major piece of tax legislation pending — a corporate tax bill that would repeal about $5 billion in tax breaks U.S. exporters receive and replace them with a variety of other corporate tax relief.

Passage of this measure is needed to end penalty tariffs that are being imposed on 1,600 U.S. exports to Europe as long as Congress fails to repeal the current export tax breaks, which the World Trade Organization has ruled represent violate global trade rules. However, there are big differences between the versions of the bill passed by the House and Senate.

Senate Finance Committee Chairman Charles Grassley on Thursday called on the White House to honor its commitment to get actively involved in lobbying Congress to pass the corporate tax measure now that the individual tax package has been approved.