House members voted along party lines except for four Democrats who supported the GOP proposal, approving the bill by a vote of 222-203.
The House bill only partially reduces taxes on dividends, which the administration has called for completely eliminating.
The administration argues that the “dividend tax” essentially causes the same money to be taxed twice, once as corporate profits and once as personal income.
However, President Bush has expressed support for the House’s version of the bill, which would cut the tax in half — lowering it from 38.6 percent to 15 percent. The administration endorsed the bill again on Friday.
White House spokesman Ari Fleischer said the president is still committed to doing away with the dividend tax.
“Make no mistake, the president is still committed to a 100 percent elimination of the taxation on individual dividends, because it’s double taxation. He thinks it’s wrong. And by eliminating it, it creates the greatest boost for the economy. That continues to be the president’s goal,” Fleischer told reporters Thursday.
The House version of the bill also lowers taxes on capital gains, income and small business investment.
House Republicans said the measure would create jobs and strengthen the economy.
“Support this bill and support job creation in this country,” House Speaker Dennis Hastert (R-Ill.) said.
Democrats said the measure would help only the rich and endanger the economy by driving up the budget deficit.
“In two years, President Bush and Republicans in Congress have presided over the most dramatic deterioration in our economic health in our nation’s history,” House Minority Leader Nancy Pelosi (D-Calif.) said.
House and Senate members will have to meet in conference to iron out what may end up being major differences in the two bills.
On Thursday the Republican-controlled Senate Finance Committee passed a $350 billion version of the tax cut bill. The Senate bill reportedly came closer to reaching the administration’s goal of no dividend tax by raising some taxes in other areas. The bill, for example, would eliminate income tax exemptions for Americans working overseas.
House Republicans said they would not accept the new taxes proposed by their Senate colleagues.
“Only in the United States Senate would they come up with an idea to raise taxes so you can cut taxes,” Rep. Ron Lewis (R-Ky.) said.
The Senate’s version of the bill could go to the floor for a vote as early as Monday.