Posted on 05/15/2003 8:32:31 PM PDT by Capitalism2003
Edited on 05/15/2003 8:53:48 PM PDT by Admin Moderator. [history]
UPDATED 11:50 PM EDT:
WASHINGTON (AP) - The Senate revived the backbone of President Bush's formula for stimulating a laggard economy Thursday, narrowly passing a $350 billion package of tax cuts that would suspend all taxes on stock dividends for three years.
The Republican bill, passed on a 51-49 mostly party-line vote, is less than half the size Bush sought but one that advances previously scheduled reductions in income tax rates, provides $20 billion in new aid to state and local governments and raises taxes for a few.
It also would increase the child tax credit from $600 to $1,000, gradually eliminate the marriage penalty and encourage new investment by small businesses by allowing them to write off $100,000 in new equipment purchases.
But its biggest feature by far is suspending taxes on stock dividends, a provision added earlier Thursday only after Vice President Dick Cheney was called to break a 50-50 tie on the issue.
Treasury Secretary John Snow called the Senate's action on dividends a ``bold step,'' saying it ``will have a profoundly positive effect on job creation, corporate governance and the well-being of all Americans.''
Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, said he hoped to begin negotiations next week with the House, which this month passed its own package of $550 billion in tax cuts through 2013.
Bush had asked Congress to abolish taxes on dividends paid to investors at a cost of $400 billion over the next decade, arguing that corporate profits are now effectively taxed twice, once at the corporate level and again by stockholders on the dividends paid to them.
The House instead voted to reduce the top rate on them, as well as capital gains, to 15 percent. Dividends and capital gains are now taxed at a maximum rates of 38.6 percent and 20 percent respectively.
The Senate bill chops dividend taxes in half this year, suspends them entirely in 2004, 2005 and 2006, and restores them in 2007, at a total cost of $124 billion.
Democrats derided the dividend tax suspension, saying it would come at the expense of married couples whose tax breaks were scaled back.
``Americans today who otherwise will receive the relief on the marriage penalty contained in this bill are going to be subsidizing and paying for, in effect, these tax-free dividends,'' said Sen. Max Baucus, D-Mont.
To hold the votes of moderate Republicans, the package includes $20 billion in new Medicaid and other aid to states and tax and fee increases totaling $90 billion, limiting the net cost of the package over the next decade years to $350 billion.
Democrats argued that a payroll tax holiday rebating some Social Security and Medicare taxes to workers would stimulate the economy faster than suspending dividend taxes, but their ideas were repeatedly rejected by the narrowly GOP-controlled Senate.
``I'm not opposed to creating millionaires. I think the country needs more millionaires,'' said Sen. Mary Landrieu, D-La. ``What I'm opposed to is constantly this other side coming to the floor trying to give breaks to the people that are already at the top at the expense of those at the bottom.''
The bulk of the bill moves up cuts in income tax rates passed by Congress two years ago, increases the child tax credit to $1,000 and gives married couples a tax break. It also lets small businesses expense more of their equipment investments.
The Senate bill still has to be merged with a $550 billion package of tax cuts passed last week by the House, where Republicans rejected Bush's proposal to eliminate dividend taxes. Instead, the House voted to cut the maximum tax rates on both dividends and capital gains to 15 percent. Those maximum rates are now 38.6 percent and 20 percent respectively.
House Republicans criticized the temporary nature of the Senate's action on dividends compared with the House rate cuts that would last a decade.
``My view, it doesn't solve the problem,'' said House Speaker Dennis J. Hastert, R-Ill. ``There needs to be a permanence.''
Two Democrats, Sens. Ben Nelson of Nebraska and Zell Miller of Georgia, gave Republicans the edge they needed for suspending dividend taxation. Sen. Evan Bayh of Indiana added a third Democratic vote for final passage of the bill. The Senate Finance Committee had decided earlier to excuse investors from taxes on the first $500 in dividends each year.
Republican George Voinovich of Ohio declared himself the 50th senator to back the plan Thursday morning after the White House agreed to convene a commission to rewrite the entire tax code. Republican Sens. John McCain of Arizona, Lincoln Chafee of Rhode Island and Olympia Snowe of Maine voted against the dividend tax suspension.
The Senate had to work within a budget passed last month that limited tax cuts to $350 billion through 2013, forcing Republican tax writers to scramble for new sources of revenue.
The Senate added language blocking companies such as Enron and Global Crossing that overstated their earnings from claiming a tax refund.
Senators also agreed to reformulate Medicare to give rural states more money and to cut taxes on business profits earned abroad and brought back to the United States to 5 percent from 35 percent for one year.
John Breaux, D-La., failed in his attempt to repeal a tax increase on Americans working abroad. Those workers would no longer be able to exclude the first $80,000 of their foreign income from U.S. taxes, but they could claim a credit against any foreign taxes paid.
The bills are S1054 and HR2.
If they don't have the money who will pay for all that?
I believe the Gov. is going to call a special session.
Boxer, one of the staunchest advocates of abortion in the Senate, now claims to care about children.
Amazing isn't it
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