Taxes and Tactics
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KWAME HOLMAN: Just before midnight last night, Vice President Cheney announced what President Bush and most Senate Republicans had been hoping to hear.
VICE PRESIDENT DICK CHENEY: The ayes on this vote are 5 1 the nays are 49. And the bill as amended has passed.
KWAME HOLMAN: The Senate had approved a $350 billion tax cut, half of what the president originally wanted, but the best he could do for now. Arizona Republican Jon Kyl.
SEN. JON KYL: This was a real victory tonight, not only for President Bush and the Republican Senate, finance committee, but of course for the American people.
KWAME HOLMAN: But getting the votes to pass the plan in a narrowly divided Senate was not easy. President Bush traveled to Nebraska on Monday to whip up support for his plan among constituents of Democrat Ben Nelson, who hadn’t yet signed on to the president’s package. By last evening, he had.
SPOKESPERSON: Mr. Nelson of Nebraska, aye.
KWAME HOLMAN: And the president’s trip to Indiana on Tuesday helped convince Democrat Evan Bayh to support the president as well.
SPOKESPERSON: Mr. Evan Bayh, aye.
KWAME HOLMAN: Mr. Bush also won the support of Ohio Republican George Voinovich, who was concerned about the cost of the tax cuts. To attract his vote, supporters compromised on the central element of the tax plan: Elimination of the tax on stock dividends. As written in the Senate bill, that tax cut would be only temporary.
SPOKESPERSON: Mr. Voinovich, aye.
KWAME HOLMAN: But last night, even with Voinovich’s vote, supporters and opponents still were deadlocked at 50-50 on the dividend tax. Vice President Cheney stepped in to break the tie.
VICE PRESIDENT CHENEY: The Senate being equally divided, the vice president votes in the affirmative and the amendment from the senator from Oklahoma is agreed to.
KWAME HOLMAN: The dividend provision in the final Senate tax bill excludes half of all dividend income from taxes this year, and would shield 100 percent of dividends from taxes until 2007. But, dividend taxes would reappear in 2008. In the House version of the tax bill, the tax rate on dividends is reduced permanently to 15 percent as is the rate on capital gains. Budget Committee chairman Don Nickles, sponsor of the Senate amendment, said eliminating the dividend tax will lead directly to job growth, and it should be the goal of a final bill.
SEN. DON NICKLES: I think we made the bill out of finance even better, made it more robust, we’ve made a lot more job creation.
KWAME HOLMAN: Through a long day yesterday, senators cast votes on 28 other amendments to the tax bill, rejecting nearly every one.
SPOKESMAN: The motion is not agreed to.
SPOKESMAN: Not agreed to.
SPOKESMAN: Not agreed to.
KWAME HOLMAN: Massachusetts Democrat Edward Kennedy urged an extension of federal benefits for unemployed workers.
SEN. TED KENNEDY: The American people understand fairness, and they understand, on the one hand, if we are going to provide billions for the wealthiest individuals in this country, we ought to look out for hard-working men and women who have played by the rules, have worked hard all their lives, have paid into the fund and now need their help and assistance.
KWAME HOLMAN: Kennedy’s amendment was turned down on a close vote.
SPOKESPERSON: And the amendment falls.
KWAME HOLMAN: However, the Senate did agree to an amendment by Finance Committee Chairman Chuck Grassley to give some states more Medicare money. Though there are major differences between the Senate and House bills, $350 billion as opposed to $550 billion, there also are similarities. Both bills would make effective immediately those tax cuts passed in 2001 but not scheduled to kick in until 2006. Individual tax rates would be lowered across the board. The so-called marriage penalty tax would be decreased. The child tax credit would jump from $600 to $1,000. And investments small businesses may deduct would increase to $100,000 from $25,000. This afternoon, President Bush said he looked forward to working with Congress to come up with the best growth package possible.
PRESIDENT GEORGE W. BUSH: We had a good day yesterday in the United States Senate. The Senate passed a bill that will make it more likely people looking for work will find a job. I am pleased with the progress. I look forward to working with house and Senate leadership to reconcile any differences they have and get a bill to my desk as soon as possible.
KWAME HOLMAN: The task of resolving the differences between the House and Senate tax-cut bills begins in earnest next week, when members from the two chambers meet to craft a final compromise. But reaching agreement may be difficult. Relations between House and Senate Republicans have been strained in recent weeks. House Republicans were unhappy their Senate colleagues broke a deal to pursue the larger tax cuts favored by President Bush.
REP. BILL THOMAS: It really needs to be remembered that the House of Representatives thought that the president’s plan was an excellent one, and we passed it without any significant modification out of the house. The Senate was not able to accept the president’s plan.
KWAME HOLMAN: Last night, Senator Nickles said he thought the Senate still had the upper hand,
SEN. NICKLES: There’s a lot of merit to the House proposal and there’s a whole lot of merit to the Senate proposal. I happen to think the administration is more intrigued with the Senate proposal.
KWAME HOLMAN: Republican leaders hope to be able to complete this and get it to President Bush before Memorial Day.