House Passes $70 Billion Tax Package
Thursday, May 11, 2006
The House easily approved a five-year, $70 billion tax package last night that would extend President Bush's investor tax cuts, keep millions of middle-income Americans off the alternative minimum tax and provide a bevy of other benefits, from a tax write-off for songwriters to a break for the University of Texas.
The Senate plans to take up the measure today, sending it to Bush for his enthusiastic signature. With its enactment, each of the major tax cuts of the president's first term -- now totaling nearly $2 trillion over this decade -- will expire en masse at midnight, Dec. 31, 2010. Yesterday's House debate focused on the budgetary impacts of those tax cuts, with Republicans saying their tax policy had sparked economic growth and triggered a surge of federal tax receipts while Democrats said those same policies were bankrupting the government.
The bill passed largely along party lines, 244 to 185, with 15 Democrats voting for it and two Republicans opposed.
The measure's centerpiece is a two-year extension of tax cuts passed in 2003 that reduced the tax rate on most dividends to 15 percent from as high as 38.6 percent and the tax rate on most capital gains from 20 percent to 15 percent. Together, the provisions will cost the Treasury $20.6 billion over five years and $50.8 billion through 2015, says the Joint Committee on Taxation. The other major piece, at a cost of $33.9 billion, would stem the reach of the alternative minimum tax, which was enacted to hit the rich but is increasingly pinching the middle class.
But other measures found their way into the bill during months of House-Senate negotiations. At the request of the Nashville music industry, tax writers allowed music companies to write off their musical advances in five years, a $13 million break over the next decade. Songwriters would be able to treat the sale of their creations as capital gains instead of income, a break worth $20 million.
Corporations that create settlement funds to compensate for environmental damage would not have to pay taxes on the investment gains of those funds, a 10-year, $116 million break that may mean such firms would not have to contribute as much to such funds. Mid-size ships plying the Great Lakes would get a $20 million break through 2015. The University of Texas system received a break on its bonds to finance building efforts.