May 11, 2006

Senate poised to pass $70 billion tax cut

By Donna Smith

WASHINGTON (Reuters) - The U.S. Senate on Thursday began
debating a $70 billion tax cut package that extends lower rates
for investors and whose passage would give President George W.
Bush a badly needed victory at a time of slumping popularity.

The vote later on Thursday was expected to be close in the
narrowly divided Senate where some moderate Republicans have
expressed concerns about the bill. But Senate Finance Committee
Chairman Charles Grassley, an Iowa Republican, said it would

The bill, the result of months of negotiations between the
two chambers, was passed by the U.S. House of Representatives
on Wednesday.

Bush, who has made tax-cutting a central plank of his
presidency and is looking to revive support for Republicans
before congressional elections in November, was expected to
sign it with great fanfare.

It will be a rare victory for Bush who is seeing his
popularity plummet in public opinion polls and who has enjoyed
few wins in Congress since his proposed Social Security
overhaul was derailed last year.

The bill, which will cost the treasury $70 billion over
five years, extends for two years a 15 percent tax rate for
dividends and capital gains. Those reduced rates for investment
income were the centerpiece of Bush's 2003 economic package and
were set to expire at the end of 2008.

The bill also extends through this year alternative minimum
tax relief for millions of middle income families who otherwise
would pay the tax originally intended for only the wealthiest

The AMT measure will help about 15 million families avoid
paying the alternative minimum tax on their 2006 income.

Democrats supported the AMT measure, but Sen. Max Baucus of
Montana said the bill was skewed too much in favor of the
wealthy and left out other expired tax breaks that would help
teachers and families pay for education.

"Working families have been left behind," Baucus said
during the Senate debate. "Congress has chosen ideological
wants over America's needs."

Grassley said those tax measures and others would be part
of a second tax cut package still being negotiated between the
House and the Senate.