Republican leaders agreed yesterday to extend three middle-class tax cuts for five years, clearing the way for Senate and House votes as early as this week on the fourth tax-cut package in as many years.
The agreement, which would cost the Treasury as much as $150 billion through 2009, was a victory for President Bush, who had scuttled a deal in July to extend the tax cuts for only two years, arguing that he could get a longer extension in the heat of the campaign season.
 
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In securing a five-year deal, the White House had to overcome the objections of some GOP moderates, who wanted the cost offset with spending cuts or other tax increases, and conservatives, who argued for a four-year extension. That way, the popular middle-class tax cuts would have to be extended again when more politically contentious tax cuts, such as last year's deep cuts in capital gains and dividends taxation, would be up for renewal.
"I think, in the end, we'll be at the longer period of time," said Sen. Don Nickles (R-Okla.), who pushed for the four-year extension.
The package would extend the $1,000-per-child tax credit that would shrink to $700 if Congress does not act. Also to be extended are an expanded tax break for married couples and a 10 percent income tax bracket that had been enlarged for just one year in the tax cut Bush signed last year. By including a temporary, one-year fix for the alternative minimum tax, the package would effectively punt the problem of the AMT, which was created to ensure that the affluent pay income taxes but which is increasingly ensnaring the middle class.
Republicans also decided to extend for one year a host of expiring business tax credits that had been part of a larger corporate tax bill languishing on Capitol Hill. The measures, worth as a much as $12 billion, include tax credits for research and development and for hiring welfare recipients, deductions for teachers' classroom expenses, and tax breaks for investment in Lower Manhattan, which is still recovering from the Sept. 11, 2001, attacks.
The package is a remnant of last year's much larger, $350 billion tax cut. To hold down the cost of that tax cut and secure the votes of GOP moderates, Republican leaders designed the most popular provisions to expire after 2004. At that time, they said those provisions could easily be extended in an election year.
The tax measure is expected to pass both houses of Congress with huge majorities, raising the cost of Bush's tax cutting to nearly $1.9 trillion over 10 years.
"I don't think this conference will produce a bill that will not pass the House and Senate," said Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) before last night's negotiations formally began.
The tax cut extensions are a priority for Bush, but Sen. John F. Kerry (D-Mass.) has also called for their passage. Jason Furman, Kerry's economic policy director, said the senator would have preferred the extension be part of a broader budget package that rolled back taxes on affluent households. But he made it clear that Kerry would not stand in the way of the bill, which could come up for a vote in the Senate today.
Democratic tax aides said efforts to hold down the cost of the tax cuts were scotched after Senate Minority Leader Thomas A. Daschle (D-S.D.) publicly indicated that he, too, could support a five-year measure. Daschle is in the midst of a tough reelection campaign.
