Tax cuts for middle class OK'd by Congress as election nears

WASHINGTON -- Congress on Thursday approved a $145.9 billion package of tax relief to extend three popular middle-class tax cuts, giving President Bush his fourth major tax victory since taking office.

The Senate approved the measure 92-3 Thursday night less than an hour after it cleared the House by a similarly lopsided 339-65.

Democrats in both chambers joined in support of the politically popular measure even though they criticized the Republican-led Congress' refusal to pay for the new tax relief at a time of soaring budget deficits.

The measure now goes to Bush for his signature. Republicans had been eager to get the measure passed to give the president a big legislative victory in the closing weeks of his campaign for re-election.

In a statement, Bush praised Congress for tax relief that is "putting more money into the hands of the American people and helping to grow our economy. As the economy strengthens, the last thing hard-working American families need is a tax increase."Without action, the three provisions affecting an estimated 94 million Americans would expire at the end of this year. The legislation keeps the per child tax credit at $1,000, retains an expanded 10 percent income bracket that affects virtually all taxpayers and retains provisions to provide tax relief for married couples.

"This is about providing tax relief for the hardworking men and women of America," Senate Finance Committee chairman Charles Grassley, R-Iowa, said in closing Senate debate on the bill.

Debate in both chambers followed similar lines, with many Democrats saying they supported the popular tax cuts but were unhappy that Republicans had refused to consider offsets such as tax increases in other areas or spending cuts to pay for the package and keep it from making future deficits worse.

Bush had rejected a deal offered by Democrats and some moderate Republicans that would have extended the tax cuts for 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 as lawmakers got closer to the Nov. 2 elections.

Sen. John Kerry, Bush's Democratic presidential opponent, said he supported extension of the middle-class tax cuts, but he criticized inclusion of corporate tax breaks in the bill and also the refusal of Republicans to agree to Democratic efforts to go further in expanding tax relief for 4 million low-income working families.

"Millions of American families are being squeezed by the weak Bush economy, falling incomes and rising health costs, and we should extend middle-class tax breaks to help them," Kerry said in a statement issued by his campaign.

Senate Minority Leader Tom Daschle, D-S.D., who is in a tight re-election race, said during the Senate debate that he would support the longer extension included in the bill but would have preferred that the tax cuts had been offset.

Democratic opponents pointed to soaring federal deficits during the Bush administration, including an expected record deficit of $422 billion this year and said that it was fiscally irresponsible to be passing further tax cuts that will push the deficits higher in future years.

But even opponents conceded that it was tough to ask lawmakers to vote against tax cuts with an election looming.

"The Republicans have so carefully and cunningly on the eve of an election planned several tax cuts in order to try to get the Democrats to vote no," Rep. Charles Rangel, D-N.Y., told the House.

Minority Whip Steny Hoyer, D-Md., said the GOP refusal to pay for the tax cuts represented "fiscal child abuse" by saddling coming generations with a national debt that is now more than $7 trillion.

But Rep. Thomas Reynolds, D-N.Y., argued, "This bill prevents a tax increase on families. If we do nothing, these taxes will go up."

The child tax credit, slated to drop to $700 next year, would be extended for five years at the higher $1,000 per child amount.

All of the tax cuts in Bush's original $1.3 trillion 10-year package are scheduled to expire after 2010 although Bush is campaigning for re-election on a platform of getting Congress to make of his tax cuts permanent.

The relief from the so-called marriage penalty, which means that some couples end up paying more in taxes than if they were single, and the expanded 10 percent tax bracket would also be extended so that the higher tax relief would last through 2010.

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, including the alternative minimum tax, was put at $131.4 billion over 10 years.

The tax package also includes provisions to extend 23 expiring tax breaks, generally for one year, at a cost of $12.97 billion.