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US Congress passes $70 billion tax cut

Written by: Staff
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WASHINGTON, May 12 (Reuters) The US Congress has passed a 70 billion dollar tax cut package that extends lower rates for investors, giving President George W. Bush a badly needed victory at a time of slumping popularity.

The Republican-led Senate passed the tax cut bill on a mostly party-line vote of 54-44 yesterday, over the objections of Democrats who said it was skewed to favor the wealthy. The US House of Representatives acted on Wednesday and the bill now goes to Bush who is expected to sign the measure with great fanfare.

Bush made tax cuts a central plank of his presidency and passage of the bill is a rare victory for the president who is seeing his popularity plummet in public opinion polls. He has enjoyed few wins in Congress since his proposed Social Security overhaul was derailed last year.

Bush is looking to revive support for Republicans before congressional elections in November and is pointing to strong economic growth and a stock market on the verge of reaching an all time high as proof his tax cuts are working.

But Democrats who opposed the bill, the result of months of negotiations between Senate and House Republicans, said negotiators left out popular tax breaks for individuals and businesses that had been included in the original Senate bill.

''Working families have been left behind,'' Sen. Max Baucus, a Montana Democrat said. ''Congress has chosen ideological wants over America's needs.'' Sen. Charles Schumer, a New York Democrat, also noted that negotiators dropped a tax increase for big oil companies that was in the original Senate bill. He said that 5.1 billion dollar tax increase would have paid for education credits and other popular tax breaks such as the research and development tax credit that were dropped.

Grassley said those tax measures and others, including extension of a deduction for state and local sales taxes, would be part of a second tax cut package still being negotiated between the House and the Senate.

'HELPS CANDIDATES' But Schumer said the choices made by the Republican majority will be an issue in congressional campaigns.

''It will be used all the way up to November of 2006 when the American people will change the leadership in Congress,'' Schumer told reporters.

Republicans said the bill improves their chances.

''It's going to help people, that helps candidates,'' said Sen.

Jon Kyl of Arizona.

The bill, which will cost the US treasury 70 billion dollar over five years, extends through 2010 a 15 percent tax rate for dividends and capital gains. Those reduced rates for investment income were the centerpiece of Bush's 2003 economic package and were set to expire at the end of 2008.

The bill also extends through this year alternative minimum tax relief for millions of middle income families who otherwise would pay the tax originally intended for only the wealthiest Americans.

The AMT measure will help about 15 million families avoid paying the alternative minimum tax on their 2006 income.

Another measure in the bill would also extend through 2009 a tax break for businesses that also was part of the 2003 tax package that allows them to immediately write off up to 100,000 dollar in investments in new equipment.

The bill also extends a tax break for financial companies on income earned overseas.

REUTERS PDS PM0344

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