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WASHINGTON (AP) — President Bush said he saw progress in Congress on his tax-cut plans Tuesday as a House committee passed a scaled-back version of his $726 billion reduction aimed at triggering economic expansion.

The House Ways and Means Committee voted 24-15 along party lines to approve a bill that would cut taxes $550 billion over the coming decade and reduce taxes on stock dividends and capital gains to 15 percent for most investors. The measure would reformulate the foundation of the White House plan, the elimination of taxes on dividends.

Tax writers in the Senate made a symbolic step toward the president by including a short-term dividend tax cut in the earliest version of its bill. It eliminates taxes on dividends for only one year but succeeds in making the bill more politically palatable to many Senate Republicans.

Bush, speaking to hundreds of supporters at the U.S. Chamber of Commerce, began to claim victory in the tax cut debate.

"Both parties, in both houses of Congress, now recognize that tax relief helps create jobs," Bush said. "That's important, that both houses understand that when somebody keeps more money, they're likely to demand a good or a service, when they have more of their own money to spend."

The tax bill under construction in the Senate still faces formidable hurdles, and Republicans backing the president's formula have yet to line up their party behind a single plan.

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Finance Committee Chairman Charles Grassley, R-Iowa, proposed making one-third of dividend income tax-free in 2003 and two-thirds tax-free in 2004. Dividends would become free from taxes in 2005, but revert to current rates of taxation in 2006. Dividends income is taxed like earned income at rates as high as 38.6 percent.

The dividend plan pushes the tax cut $65 billion over its $350 billion budget. Aides have identified $50 billion to $80 billion in new revenue that could offset the bill's cost to the Treasury.

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