WASHINGTON (AP) — House and Senate tax writers struck agreement Wednesday on a $350 billion package of tax cuts and spending, settling for less than half the tax reductions President Bush wants.
The deal abandons the president's proposal to eliminate taxes on dividends paid to shareholders, but it still ranks as the third largest tax cut in the nation's history.
Bush planned to visit Capitol Hill this morning, when lawmakers are to convene a formal conference ratifying their agreement.
House and Senate leaders want to complete work before Memorial Day, in time for the Treasury to start sending $400 to 25 million households that qualify for an increased child tax credit.
Facing nearly unanimous opposition from Democrats, negotiators worked all day to squeeze out a bare majority of votes in the narrowly split Senate.
"We do have 50 votes," Senate Majority Leader Bill Frist, R-Tenn., said when he announced the agreement.
Supporters will need the tie-breaking vote of Vice President Dick Cheney if wavering moderates decide to oppose the bill. Senate leaders count Democrats Ben Nelson of Nebraska and Zell Miller of Georgia as votes for the bill, but they lost the support of three Republicans — Lincoln Chafee of Rhode Island, John McCain of Arizona and Olympia Snowe of Maine.
Most Democrats have objected to the tax cut ever since Bush proposed the idea early this year. "It gives away billions to those who need it least and does very little for those who need it most," said Senate Minority Leader Tom Daschle, D-S.D.
The agreement combines about $330 billion in tax cuts with $20 billion in aid to fiscally strapped states, half earmarked for Medicaid.
House Energy and Commerce Committee Chairman Billy Tauzin, R-La., said he and other members of the panel plan to vote against the bill if it retains the Medicaid spending.
Negotiators clinched the deal — and won the crucial support of George Voinovich, R-Ohio — by reducing a $383 billion outline sketched out late Tuesday night to $350 billion. They agreed to trim a year off a policy that cuts taxes on dividends and capital gains to 15 percent, and 5 percent for low-income taxpayers. Dividends are currently taxed at rates up to 38.6 percent, and capital gains at 20 percent.
The tax cut on dividends and capital gains will expire in 2008, a year earlier than negotiators had originally intended. The change cut the cost of the policy from $179 billion to about $150 billion.
"If they stay within the 350, I'm fine," Voinovich said.
Voinovich met with Vice President Dick Cheney for more than an hour Wednesday afternoon working toward an agreement. Concerned that the tax cut would worsen record deficits, Voinovich had secured a promise from Senate Finance Committee Chairman Charles Grassley, R-Iowa, that the final legislation would cost no more than $350 billion over the next decade.
"I appreciate the fact that they've been trying to honor my concerns and make me an honest man."
The foundation of the agreement includes the basic elements proposed by the president, but many expire in a few years. The agreement would cut taxes on wages by permanently reducing income tax rates.
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