House approves $70 billion tax cut bill

By Donna Smith

WASHINGTON (Reuters) – The House of Representatives on
Wednesday agreed to extend a tax break on investment income in
a $70 billion tax cut package that Democrats said would mostly
help the rich while deepening budget deficits.

The House voted 244-185, mostly along party lines, for the
package that will extend for two years a 15 percent top tax
rate for income from capital gains and dividends. That reduced
rate was the centerpiece of President George W. Bush’s 2003
economic package and was set to expire at the end of 2008.

The bill, which will cost the treasury about $70 billion
over five years, also provides a one-year extension of
alternative minimum tax relief that will protect millions of
taxpayers from a tax originally intended for the wealthiest
Americans.

The Senate was expected to pass the bill in a close vote on
Thursday.

Bush supports the measure. “I urge the Senate to vote
swiftly so that I can sign this bill into law,” he said late
Wednesday in a statement.

Republicans said low rates on capital gains and dividends
helped fuel the economic recovery, bringing more revenues into
federal coffers.

Treasury Secretary John Snow at a rally organized by House
Republicans cited a Treasury Department report released on
Wednesday showing a larger-than-expected increase in tax
revenue in April. Snow said the surge was due mostly to higher
corporate tax receipts and credited Republican tax cuts.

“The revenues to the U.S. government are surging, and with
this surging revenue we are going to be in a position to see
the deficit come down,” Snow said.

Republican backers pointed to strong economic growth and a
stock market on the verge of an all-time high as proof they had
done the right thing.

“We all know that our tax relief sparked this economic
growth,” said House Speaker Dennis Hastert, an Illinois
Republican. “By extending key provisions of that tax relief,
today’s legislation adds just another spark to the already
booming economy.”

But Democrats said the tax package was skewed to the
wealthy, set the wrong priorities and squeezed funding for
important programs while adding to the nation’s debt.

Rep. Earl Pomeroy, a North Dakota Democrat, said Republican
tax cuts were forcing lawmakers to raise the debt ceiling for
the fifth time since 2002. He said the nation’s debt, which
stood at about $5.6 trillion when Bush became president, will
have doubled by the time he leaves the White House.

“We are leaving our children with a legacy of debt that
they will never get out of,” Pomeroy said during the House
debate on the bill.

The liberal Center on Budget and Policy Priorities said the
average middle-income household would see a tax reduction of
about $20, while households with incomes that top $1 million
will see an average $42,000 tax cut.