GOP Hopes for Boost From $70B Tax Cut
Friday, May 12, 2006; 5:53 PM
WASHINGTON -- Republicans promise that a $70 billion election-year package extending lower rates for investors and saving billions for families with above-average incomes will produce economic gains for the nation.
And Republicans hope its passage will give a much-needed boost to President Bush and the GOP-controlled Congress as they both experience their lowest approval ratings in polls since his election in 2000.
Whether a disgruntled public will give them much credit, however, isn't clear. The bill mostly extends tax cuts that were given a short lifespan when awarded in 2003 or are renewed each year anyway. Voters won't feel direct results before Election Day _ and in the case of investors, until the next president is about to be sworn in, in 2009.
The bill passed the Senate on Thursday by a 54-44 vote. Hoping to wring some mileage out of the achievement, the White House scheduled an elaborate signing ceremony for Bush next Wednesday. In a statement, the president said the bill "prevents an enormous tax hike that the American people do not want and would not welcome."
The legislation provides a two-year extension of the reduced 15 percent tax rate for capital gains and dividends, currently set to expire at the end of 2008.
It also will extend for one year recent changes to the alternative minimum tax to prevent it from hitting more upper middle-income families.
The AMT was designed to hit the very wealthy, but it is now common for taxpayers, especially those with families in high-tax states, to pay the AMT on incomes of $100,000 and more.
The debate followed partisan lines, with Republicans eagerly crediting the tax cuts, first enacted in 2003, with a surging economy, millions of new jobs and booming tax revenues. Democrats overwhelmingly opposed the bill, saying its tax cuts on capital gains and dividends will flow mostly to wealthy.
Just three Republicans _ Olympia J. Snowe of Maine, Lincoln Chafee of Rhode Island and George Voinovich of Ohio _ voted against the bill. Democrats Ben Nelson of Nebraska, Bill Nelson of Florida and Mark Pryor of Arkansas voted in favor.
Republican Gordon Smith of Oregon originally registered a "nay" vote but changed to "aye" just before the tally was announced.
Republicans said that to fail to extend the tax cuts would amount to a tax increase on investors, big and small, as well as on families facing the alternative minimum tax. They dubbed the bill the "Tax Increase Prevention Act."
"Are we going to increase taxes on well over 100 million people ... or are we going to keep taxes low?" said Majority Leader Bill Frist, R-Tenn.