GOP OKs deal on tax cuts

Republican leaders in Congress yesterday agreed to a $69 billion bill on tax-cut extension, which could be approved by both chambers by the end of the week, handing President Bush one of his top tax goals.

The House is expected to vote late today on the extension package, and Senate Republican leadership aides said yesterday that they hope the Senate will follow suit tomorrow or Friday.

“I think this legislation is critical,” said Treasury Secretary John W. Snow. He said that the economy has improved in recent years and that Republican tax relief “lies at the heart of the good recovery we’re seeing.”

“Today’s agreement is a victory for working Americans and for our strong economy,” said House Majority Leader John A. Boehner, Ohio Republican.

The tax legislation is a leftover from last year. After months of negotiations, House and Senate tax writers agreed to a measure that would extend for two years the 15 percent tax rate on capital gains and dividends income, otherwise set to expire in 2008. It also would extend a one-year fix to save millions more Americans from having to pay the alternative minimum tax.

Although Republicans focused on the economic necessity of the bill, its approval this week also would be an election-year bonus for their party and President Bush as they fight to maintain their majority.

“It’s important for people who are looking to the November elections and are looking to know that having a Republican majority makes a difference,” said Sen. John Thune, South Dakota Republican.

The measure was tentatively agreed to last week, but was delayed because Senate tax negotiators were trying to move a separate, smaller package of tax-cut extensions in tandem with the larger package, Senate Republican aides said. House and Senate leaders said late yesterday that they have now agreed to let the larger package proceed first, and are continuing talks on the smaller bill.

Democrats called the larger bill a giveaway to business.

“Bush’s tax plan offers next to nothing to average Americans while giving away the store to multimillionaires,” said Senate Minority Leader Harry Reid. The Nevada Democrat linked the bill to the problems at the gas pump. “The tax reconciliation bill giveaway on capital gains and dividends will do much more for Exxon Mobil board members than it will do for Exxon Mobil customers,” he said.

Some more liberal Republicans also think that the bill’s capital gains and dividends relief is geared to the wealthy and that a greater portion of the bill should have been devoted to AMT relief, which helps the middle class. “We should do far more on the alternative minimum tax,” said Sen. Olympia J. Snowe. Maine Republican.

Republicans said that contrary to Democrats’ assertions, Republican tax cuts have increased federal revenue and extending them is critical to continued economic growth. “These provisions have proven to strengthen our economy and help provide a stable and inviting environment for small businesses to invest and grow,” said Senate Majority Leader Bill Frist, Tennessee Republican.

Mr. Frist hit at Democrats’ tax policy, saying, “Rarely have they met a tax hike they don’t like.”

Under budget rules, the Republican tax bill is protected from a Senate filibuster because it is within a preset $70 billion limit.

Senate Finance Committee Chairman and lead Senate negotiator Charles E. Grassley, Iowa Republican, said they now “have an understanding” about how to deal with the smaller tax-cut bill. It will, among other things, extend expiring relief for college students paying tuition, teachers buying supplies for classrooms, and businesses conducting research and development, he said. Discussions are ongoing on the smaller measure, said lead House negotiator Rep. Bill Thomas, California Republican and chairman of the House Ways and Means Committee. “They are all important; they will all be dealt with,” he said of the leftover items.

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