Bush Signs Tax Cut Extensions
President Bush signed a $70 billion tax cut package Wednesday that Republicans hope will ingratiate them with voters as they head into midterm elections with worries about holding control of Congress.
"Our pro-growth policies stand in stark contrast to those in Washington who believe you grow your economy by raising taxes and centralizing power," said Mr. Bush, who was joined at the signing ceremony by Vice President Dick Cheney. "They are wrong. Our pro-growth economic polices are working for all Americans."
CBS News White House correspondent Peter Maer reports the election-year package extends lower tax rates for investors and saves billions for people with above average incomes.
The GOP says the tax cuts, which were first enacted in 2003, have created millions of new jobs and bolstered tax revenue. Democrats overwhelmingly opposed the bill, saying the tax cuts on capital gains and dividends will flow mostly to rich Americans.
"The bill I sign today is a victory for the American taxpayers and is a strong lift for our economy," Mr. Bush said.
The bill passed the Senate last Thursday by a 54-44 vote.
The legislation Mr. Bush signed provides a two year extension of the reduced 15 percent tax rate for capital gains and dividends, which were set to expire at the close of 2008.
It also extends for one year recent changes to the alternative minimum tax to prevent it from hitting more upper middle income families. The AMT was designed to hit the very wealthy, but it is now common for taxpayers, especially those with families in high tax states, to pay the AMT on incomes of $100,000 and more.
The GOP sees the tax cut extensions as an opportunity to boost the approval ratings for the president and the Republican-controlled Congress, which are at their lowest point in the Bush presidency.
"The tax cuts have helped grow the economy and create millions of new jobs," the president said. "With this bill, we're sending the American people a clear message about our policy: We're going to continue to trust the American people with their own money."
Voters, however, won't feel the impact of the tax cut extensions before Election Day, and in the case of investors, until the next president is about to be sworn in, in 2009.
Democrats planned a quick rebuttal to the elaborate signing the White House assembled under sunny skies on the South Lawn. They say the tax cuts favor the wealthy and even oil companies while letting languish Senate-passed tax breaks on college tuition and state and local sales taxes, as well as a research and development tax credit for businesses. Each expired in December.
Mr. Bush also renewed his threat to veto legislation to pay for war in Iraq and hurricane relief at home because it has been loaded with election-year add-ons. He has set a limit of $92.2 billion for the war and hurricane relief plus an additional $2.3 billion to prepare for a possible bird flu pandemic.
"If this bill goes over the limit or includes non-emergency or wasteful spending I'll veto it," Mr. Bush said.
Passage of the tax cut extensions was the first step of a two-track strategy for advancing the GOP's election year tax cut agenda. Another bill containing about $22 billion to $23 billion in tax breaks backed by Republicans and Democrats is expected to advance soon as part of a follow-up bill.
Those include preserving tax deductions for state and local sales taxes, a tuition tax deduction, a tax break for teachers who buy their own school supplies, and the research and development tax credit for businesses.
Even though Democrats generally opposed the tax cut extensions, they back the alternative minimum tax relief, which at about $34 billion is the single costliest part of the bill.
The AMT was established in 1969 to ensure that all taxpayers pay at least some tax, but it was not indexed for inflation. Now, it often hits better-off taxpayers in Democratic-leaning high tax states such as New York and California, where it threatens benefits such as the child tax credit and state tax deductions.