By William M. Welch, USA TODAY
WASHINGTON — With a push from Vice President Cheney, Republicans in Congress reached a tentative agreement Wednesday night on a 10-year, $350 billion tax-cut package that benefits investors and families while sending aid to financially strapped states.
The agreement allows President Bush to claim victory by passing the second major tax-cut package of his presidency. But he is forced to accept a package on a scale that he denounced as "itty bitty" earlier this month — less than half the $726 billion he sought.
Republicans said the House of Representatives could ratify the deal late today. The Senate could follow on Friday, in time to meet Bush's demand to have the tax-cut bill on his desk by Memorial Day.
Details were still being worked out Wednesday night. The effective dates of some provisions were being adjusted to keep the package within $350 billion. That means many of the tax cuts will expire in a few years unless extended by a future Congress and president.
Cheney helped broker the deal by meeting with House Ways and Means Committee Chairman Bill Thomas, R-Calif., who had angrily left a negotiating session with Senate Finance Committee Chairman Chuck Grassley, R-Iowa. The final changes were made to win a 50th Senate vote from Sen. George Voinovich, R-Ohio.
Conservatives were unlikely to be pleased with the results. One top Senate Republican aide said the deal produced a "streamlined version" of larger tax bills passed by the House and Senate.
The agreement would:
• Reduce taxes on dividends paid to shareholders, and on profits from the sale of stock and other investments, to a maximum 15%. The tax on capital gains is now a maximum 20%, and dividends are taxed as ordinary income. Bush had wanted to repeal the dividend tax but had proposed no change in the capital gains tax rate. The cuts take effect this year.
• Accelerate already scheduled reductions in income tax rates, making them effective this year. Rates would drop from 27%, 30%, 35% and 38.6% to 25%, 28%, 33% and 35%.
• Speed up tax breaks for families. The child tax credit would rise from $600 to $1,000.
• Limit the duration of many of the tax breaks. To hold down the cost, the bill would automatically repeal some of the provisions, including the dividend and capital gains breaks and the child tax credit, after several years.
• Send $20 billion to states over the next two years. Senate cuts in reimbursement rates to health providers were dropped.
• Drop tax increases passed by the Senate.
The true cost of the tax cuts would almost certainly be higher than $350 billion.
The accounting was held down by a series of bookkeeping gimmicks — particularly the repeal of some tax cuts after several years. The assumption is that a future Congress would continue the tax cuts for families, businesses and investors.
