Although the 11-year plan is somewhat smaller than the $1.6 trillion package the president originally proposed, he hailed it as major victory.
“A year ago, tax relief was said to be a political impossibility. Six months ago, it was supposed to be a liability. Today, it becomes a reality,” Bush said at a signing ceremony at the White House.
Under the new law, about 95 million taxpayers will receive rebates ranging from $300 – $600 this summer. Bush advisers say the refunds will help revive a flagging economy, but critics say the checks are more of a public relations stunt than a serious economic stimulus.
Much of the tax bill’s relief occurs slowly over the next decade, including across-the-board reductions in income tax rates that will mean more take-home pay for all taxpayers.
The new law drops the income tax rate for the highest earners from 39.6 percent to 36 percent (President Bush had originally proposed a cut to 33 percent) and creates a new 10 percent tax bracket for the lowest-income earners.
The plan reduces the “marriage penalty” tax on two-income couples, gradually repeals the estate tax and doubles the $500 child tax credit.
While the bill got significant Democratic support, most Democrat leaders criticized it as far too large to meet other national priorities, such as increased spending on education and a Medicare prescription drug benefit, and said it would cost at least $4 trillion in the second decade.
They contend it remains unfairly tilted toward the wealthy, even though several provisions were added by Senate moderates to benefit lower-income people.