House Passes Bush Tax Cuts

The House on Wednesday passed a bill sought by President Bush to deliver tax cuts to investors and to keep 15 million taxpayers from being hit by the alternative minimum tax.

The House passed the $70 billion tax-cut measure by a 244-185 vote. The Senate is expected to approve the bill Thursday.

The bill devotes $21 billion to a two-year extension of the reduced 15 percent tax rate for capital gains and dividends, currently set to expire at the end of 2008.

It would also extend, for this year, recent changes to the alternative minimum tax, originally aimed at making sure the wealthy pay at least some taxes to prevent it from hitting more upper middle-income families.

And it would keep 15 million families from being hit this year with the alternative minimum tax, which was designed to make sure the wealthy paid taxes but is ensnaring more upper middle-income families because it was not indexed for inflation. The cost of this one-year AMT "patch" is $34 billion.

"What we do today protects jobs, protects the incomes of our people, strengthens America's economy and protects our future," Rep. Nancy Johnson, R-Conn., said Wednesday.

Critics, including many Democrats, have attacked the tax-rate reductions on dividends and capital gains as being largely tilted to the wealthy. They say provisions should not be extended at a time of large budget deficits and massive spending for the war in Iraq.

For those with income of $50,000 or less, the average saving is no more than $46. those with income of up to $100,000 average no more than about $400 saved; those with income of $100,000 to $1 million save anywhere from $1,300 to $5,500. Taxpayers with more than $1 million in income will average nearly $42,000 a year in savings, reports CBS News correspondent Sharyl Attkisson.

Rep. Louise Slaughter, D-N.Y., said during House debate that Republicans keep "passing bills that raise our deficits and increase our staggering debt, while they give away big tax breaks for the wealthiest corporations in the world and provide more obscene tax relief for the wealthiest 1 percent of Americans.

"And the rest of America gets left behind at the restaurant, holding the check."

The agreement capped weeks of talks among GOP lawmakers over how to go ahead on their party's tax agenda. They had to decide how best to deal with a rule that lets them advance up to $70 billion in cuts in a way that would prevent any filibuster from Senate Democrats.

If the bill passes the Senate, Mr. Bush would achieve one of his top tax priorities and give his GOP allies on Capitol Hill a victory in times of sagging poll numbers.

As CBS News corespondent Gloria Borger reports, the GOP is going back to its basics — tax cuts. "This is something the president really wanted, he lobbied for this, he personally called the committee chairman on this measure because now the White House understands they have to get together with House Republicans and start agreeing with Republicans on something," Borger says.

Republicans devised a strategy to advance the investor tax breaks and alternative minimum tax relief in a first, filibuster-proof bill, then use a second bill for other tax breaks.

The second bill, expected to cost perhaps $30 billion, is to contain a number of widely backed tax breaks, among them a tuition tax deduction, a tax break for teachers who buy their own school supplies and a research and development tax credit for businesses.

But top Senate Finance Committee Democrat Max Baucus of Montana said Wednesday that the benefits of "capital gains and dividend reductions are outweighed by the cost of the deficits" they create. Many economists believe budget deficits put upward pressure on interest rates.

Treasury Secretary John Snow asserted that the tax breaks that would be extended have ushered in a period of rising business investment and strong economic growth. "When you get investment occurring and strong GDP growth, you get jobs," he said.

Under the bill, wealthier people would be allowed to transfer retirement savings into Roth IRAs. This would provide a shorter-term revenue boost, which helped lawmakers fit more measures into the bill. That's because money moved from traditional IRAs into Roth accounts is taxed immediately, instead of later, when taxpayers withdraw their invested money.

Opponents say the Roth plan would help the Treasury now but shortchange the government in the future years because money saved in a Roth IRA grows tax free.

The bill also would extend for two years provisions sought by small businesses to let them write off up to $100,000 in investments in equipment.