- The Washington Times - Thursday, May 8, 2003

Senate Republicans reached a deal last night on a tax-cut bill that reduces the tax individuals pay on corporate dividends, though it doesn’t go as far as President Bush had wanted.The deal was struck by Republican leaders and Sen. Olympia J. Snowe, Maine Republican, who were under pressure to have a bill that Finance Committee Chairman Charles E. Grassley could present to the committee this morning.Under the proposal the first $500 of income from dividends would not be taxed.The tax on the rest of an individual’s dividend income would be based on a formula. For the first five years, 10 percent of the rest of the income wouldn’t be taxable, and for the next five years, 20 percent wouldn’t be taxable.The president had sought a full elimination of the taxes that individuals pay on dividends, arguing that the money is taxed as corporate earnings. Neither the House nor Senate followed, but the $550 billion House plan goes much further than the Senate plan by treating dividend income like capital gains, and then reducing the capital gains tax rate.The Senate bill is expected to be worth about $430 billion. Mrs. Snowe and Sen. George V. Voinovich, Ohio Republican, have insisted that any amount above $350 billion be accounted for through offsetting spending cuts or revenue increases, and Republicans have apparently found enough to satisfy the two.Mrs. Snowe said the agreement is “consistent with the principles Senator Voinovich and I established at the outset.”“Given my concerns about future deficits, I believe this plan is a fiscally-responsible approach,” she said. Her office said nearly 85 percent of those who receive dividend income are covered completely under the $500 limit.The House as well as the Senate plans include the other elements of the president’s plan, such as accelerating the income tax rate cuts and the child credit.•This article is based in part on wire service reports.


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