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House approves $70 billion tax cut bill

Posted on: Wednesday, 10 May 2006, 18:39 CDT

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.

Source: REUTERS

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