|May 11th, 2006, 05:00 AM||#1|
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House Passes Tax Cuts for Investors
May 10 6:52 PM US/Eastern
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By ANDREW TAYLOR
Associated Press Writer
The House on Wednesday passed a bill sought by President Bush to deliver tax cuts worth $70 billion to investors and to keep 15 million taxpayers from being hit by the alternative minimum tax
The House vote was 244-185. The Senate was expected to clear the bill for Bush's signature Thursday.
The bill provides a two-year extension of the reduced 15 percent tax rate for capital gains and dividends, currently set to expire at the end of 2008.
It also would extend, for this year, recent changes to the alternative minimum tax _ originally aimed at making sure the wealthy pay at least some taxes _ to prevent it from hitting more upper middle-income families.
The debate divided starkly along partisan lines, with Republicans crediting the tax cuts, first enacted in 2003, with a surging economy, millions of new jobs and surging tax revenues. Democrats countered that the deficit-financed tax cuts are tilted in favor of wealthy investors and that the economic benefits are not as great as advertised.
"Our tax relief sparked this economic growth," said House Speaker Dennis Hastert, R-Ill. "And by extending key provisions of that tax relief, today's legislation adds just another spark to the already booming economy."
Added Treasury Secretary John Snow: "It sends a terrific message to the markets that we're going to continue to have low rates on capital."
Critics, including most Democrats, attacked the tax rate reductions on dividends and capital gains as being skewed in favor of the rich. They noted that it was the second half of a GOP budget package that began with $39 billion in benefit cuts over five years, many of which came from programs for the poor such as Medicaid.
Democrats also cited a joint study by the Urban Institute and the Brookings Institution that shows taxpayers with incomes greater than $1 million per year winning tax cuts of $42,000 under the bill while families with incomes of $50,000 a year would average a $46 tax cut.
"The Republican Party ... is sending all the millionaires on an all- expenses-paid vacation _ for $41,000 a year," said Rep. Jim McDermott, D-Wash. "The rest of America is being forced to choose between filling the gas tank or stocking the refrigerator."
Added Richard Neal, D-Mass: "You cut taxes for Wall Street at the expense of Main Street."
Just 15 Democrats joined all but two Republicans in voting for the bill.
Passage of the bill is the first step of a two-track strategy for advancing the GOP's election-year tax cut agenda.
The first, $70 billion tax bill focused on investor tax breaks and alternative minimum tax relief and it can advance under special rules blocking Senate Democrats from filibustering it to death. Another bill that contains $30 billion in tax breaks backed by both Republicans and Democrats, will advance later.
Those widely supported tax breaks include preserving tax deductions for state and local sales taxes, a tuition tax deduction, a tax break for teachers who buy their own school supplies and a research and development tax credit for businesses.
Under the bill passed Wednesday, wealthier people would be allowed to transfer retirement savings into Roth IRAs. This would provide a shorter-term revenue boost, and therefore helped lawmakers fit more measures into the bill. That's because money moved from traditional IRAs into Roth accounts is taxed immediately, instead of later, when taxpayers withdraw their invested money.
Opponents say the Roth plan would help the Treasury now but shortchange the government in future years because money saved in a Roth IRA grows tax free.
The bill also would extend for two years provisions sought by small businesses to let them write off up to $100,000 in investments in equipment.
"What we do today protects jobs, protects the incomes of our people, strengthens America's economy and protects our future," said Rep. Nancy Johnson, R-Conn.