Middle-Class Tax Cuts Extension
The Associated Press
WASHINGTON Sept. 23, 2004 Legislation
to extend several popular middle class tax cuts cleared a House-Senate
conference and could be on President Bush's desk within days,
handing him a major legislative victory in the closing weeks
of the presidential campaign.
The $145.9 billion package marked the fourth
significant tax cut package that the president has championed
since taking office.
The bill was considered must-pass legislation
by Republicans because without it provisions dealing with the
child tax credit, relieving the marriage penalty and providing
an expanded 10 percent tax bracket would have expired at the
end of this year.
The House was expected to take up the measure
as early as Thursday. Republican leaders predicted it would
win Senate passage either Friday or early next week.
"President Bush has made it a priority
to make sure that families keep more of their own money, and
we intend to deliver on that priority," House Ways and
Means Committee Chairman Bill Thomas, R-Calif., said after a
joint House-Senate conference committee completed work on the
bill late Wednesday.
While Democrats has originally argued that
the government could not afford the price tag of extending the
tax cuts in light of soaring budget deficits, leaders of both
parties expected the legislation to pass easily in both chambers.
Bush had rejected a deal in July that would
have extended the tax cuts for just one year and paid for them
by closing various corporate tax loopholes. He held out instead
for a five-year extension in a gamble that opposition would
lessen the closer lawmakers got to the November elections.
All members of the House must stand for re-election
on Nov. 2, as will two-dozen senators.
Senate Minority Leader Tom Daschle, D-S.D.,
who is in a tight re-election race, said last week that he could
support the longer extension and would not insist on the tax
cuts being paid for by raising taxes in other areas.
The tax package would keep the child tax credit
at $1,000, instead of letting it drop to $700. It also would
continue an expanded 10 percent tax rate that lowers tax bills
for virtually all taxpayers. A third provision would continue
to offer married couples relief from the so-called marriage
penalty that can take a bigger tax bite from some couples than
if they were single taxpayers.
The child tax credit was extended for five
years, while the marriage penalty relief was extended for four
years and the expanded 10 percent tax bracket for six years.
In addition to those three provisions, the
tax package would extend for one year current relief from the
alternative minimum tax, which was intended to make sure that
wealthy Americans did not escape paying taxes but is starting
to ensnare more middle income taxpayers.
The cost of the middle class tax relief was
put at $131.4 billion over 10 years.
At the last minute, the Republican leaders
of the conference committee decided to extend, generally for
one year, nearly two dozen business tax breaks. The largest
one of these would extend a research and development tax credit
for one year at a cost of $7.56 billion.
Other tax breaks which would be extended included
support for the economic recovery of New York City's lower Manhattan
district, which was hit during the Sept. 11, 2001, terrorist
attacks, and tax credits to support the purchase of electric
cars and the production of electricity from wind and biomass
products, including poultry litter. The total cost for expanding
the expiring business tax breaks was put at $12.97 billion.
Sen. Max Baucus, D-Mont., failed in his efforts
to amend the package by including additional corporate tax breaks
or alternatively to hold down the cost by limiting the middle
class tax breaks to just one year and paying for it by closing
various corporate tax shelters.
Sen. Blanche Lincoln, D-Ark., also was unsuccessful
in efforts to expand the part of the child tax credit that is
refundable to low-income wage earners with children.
"This would provide additional tax relief
for working families," she said, arguing that her provision
would have benefited more than 4 million families whose earnings
are too low to take full advantage of the refundable child tax
Sen. Charles Grassley, R-Iowa, chairman of
the Senate Finance Committee, said he hoped with passage of
the middle class tax relief, the White House would honor a pledge
to support a separate corporate tax bill needed to repeal an
export subsidy that has been ruled illegal by the World Trade
Organization and replace it with other types of corporate tax
As long as that subsidy remains in place,
Europe is imposing penalty tariffs on 1,600 U.S. manufactured
goods and farm products exported to Europe. The tariff, now
11 percent, is increasing 1 percentage point per month.