- The Washington Times - Saturday, May 24, 2003

Congress passed a $350 billion tax-cut package yesterday, and the Bush administration said taxpayers will start seeing the effects by summer.

“The child credits will go into effect and the rate rebates will be on the way to 25 million American families by July,” said Treasury Secretary John W. Snow, who said charts adjusted for the new lower income-tax rates have been prepared and only await President Bush’s signature before being posted on the department’s and the IRS’ Web sites.

The tax-cut bill passed the House about 2 a.m. yesterday 231-200, with seven Democrats voting for it and only one Republican, Rep. Jim Leach of Iowa, voting against it. About eight hours later, it passed the Senate 51-50, with Vice President Dick Cheney casting the tiebreaking vote. Three Republicans voted against the bill, and two Democrats voted for it.

Mr. Bush said he will sign the legislation, which reduces taxes on capital gains and on the income individuals receive from corporate dividends. It also accelerates planned income-tax rate cuts, speeds up reduction of the “marriage penalty” and increases the child tax credit to $1,000 per child per year.

The bill also has temporary investment incentives for businesses and expense breaks for small businesses, and $20 billion in aid to states, most of it targeted to help states pay for Medicaid costs.

Republicans yesterday particularly touted the effects of the income-tax rate adjustments, the marriage-penalty reduction and the child tax credit.

“If you have a combined income of $56,000, you’re going to save $1,200 this year. If you have two kids, you can add another $800 on top of that. That’s $2,000 of savings for a married couple that has combined taxable income of $56,000. That is significant tax relief for families,” said Sen. Don Nickles, Oklahoma Republican.

But Democrats said the bill’s legacy will not be one of tax relief, but rather of saddling the government with debt.

“Thanks to years of disastrous Republican economic policies, every American will be saddled with roughly $3,500 worth of debt,” said Sen. Jon Corzine, New Jersey Democrat and chairman of the Democratic Senatorial Campaign Committee. “After four straight surpluses under Democratic leadership and more than 20 million jobs created, we have finally seen what Republicans are capable of when they have full control of Congress and the White House — skyrocketing deficits and unemployment as far as the eye can see.”

Many of the new tax breaks, such as reducing the marriage penalty and the dividend and capital-gains rate cuts, expire in several years, which prompted Democrats to call them “yo-yo” tax cuts.

“Phase-ins and sunsets are used to shoehorn large tax cuts into a small budget window,” said Sen. Max Baucus, Montana Democrat. “This tax cut is one big yo-yo. Now you see it. Now you don’t.”

The bill also had some determined opponents on the Republican side. Sen. Olympia J. Snowe of Maine, one of the three Republican senators to oppose the bill, called it a “trillion-dollar tax cut masquerading as $350 billion” because the provisions are bound to be extended before they expire, she said.

“I hope so,” responded Sen. George Allen, Virginia Republican, when asked about it at a news conference. Most Republicans said they hope to make the tax cut provisions permanent in the near future, arguing that it will stimulate economic growth and create jobs.

Mr. Cheney played an instrumental role throughout the tax-cut debate, casting three tiebreaking votes over the past six weeks: first on the budget, then on a critical amendment to boost the size of the dividend-tax cut, and then on yesterday’s vote on final passage.

Support for the bill grew in the House during the past two months.

The first version of the House Republicans’ budget calling for $726 billion in tax cuts barely passed, 215-212, with 12 Republicans voting against it and just one Democrat for it. But by the time the House passed a $550 billion tax-cut proposal the vote was 222-203, and yesterday’s vote for the $350 billion bill was 231-200. In the Senate, however, support fell from the initial budget vote on March 26 through yesterday’s vote and, in fact, the tax bill relied on a shifting coalition of supporters.

The Senate’s original budget passed 56-44, but the subsequent House-Senate conference agreement on the budget required Mr. Cheney’s tiebreaking vote. Then, the Senate’s $350 billion package with more than $400 billion in tax cuts but $70 billion in offsetting tax increases passed 51-49, and yesterday’s conference agreement passed 51-50.

Democrats said this week they tried to derail the bill, and Republicans gave credit to Mr. Bush for winning in spite of their efforts.

“This is the finest presidential leadership that I have ever seen with reference to an important piece of legislation,” said Sen. Pete V. Domenici, New Mexico Republican, who has served more than 30 years in the Senate. “He has handled this absolutely perfectly.”

The tax cut, though less than half the size the president proposed in January, has now been embraced by the administration, which pointed to the amount of money that is front-loaded in the current bill — more than $200 billion in 2003 and 2004.

The average taxpayer in 2003 will receive a tax cut of $715, though upper-income earners will receive more than lower-income taxpayers.

That division was not lost on Democratic presidential contenders yesterday, several of whom took aim at the president’s policy.

“Most of the money won’t be spent this year, and the bulk of it is wasted on a dividend-tax cut that most economists say will do nothing to fuel a recovery,” said Sen. Joe Lieberman, Connecticut Democrat, while Sen. John Kerry, Massachusetts Democrat, called the vote “further proof that the Bush administration is ignoring the real needs of our country.”

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