Dateline: 05/24/01

After days of debating and defeating most of 54 amendments, the U.S. Senate by a vote of 62-38 has approved its version of a $1.35 trillion 11-year tax reduction plan. A House-Senate conference committee must now work out differences between the House- and Senate-passed versions. The bill is H.R. 1836 - the Tax Relief Reconciliation Act of 2001.

Cutting the top tax rate from 39.6 percent to 36 percent of income, the Senate-approved tax cut bill falls far short of the reduction to 33 percent proposed by President Bush and approved by the House on March 8, 2001. [See: House Passes Bush Tax Cut Bill]

The bill also drops tax rates in three other income brackets: 36 percent to 33 percent, 31 percent to 28 percent and 28 percent to 25 percent. Several amendments making minor adjustments to tax cut rates were rejected by the Senate.

Compared to the $1.35 trillion in tax cuts over the next 11 years, the plan proposed by President Bush would result in around $1.6 trillion in tax cuts over the same period.

The bill passed today by the Senate also cuts the tax rate in the lowest income bracket from 15 percent to 10 percent, provides for total repeal of the estate tax, reduces the "marriage penalty" for dual-income couples and slowly increases the child tax credit to $1,000.

Earlier this week, Senators rejected 49-50 a controversial amendment that would have triggered a delay of the tax cuts and new federal spending if efforts to pay down the $3 trillion national debt failed to remain on schedule. 

Sponsors of the trigger amendment, Sen. Olympia Snowe (R-Maine) and Sen. Evan Bayh (D-Indiana), argued that the trigger provision would help protect Social Security and other critical programs if the projected 10-year $5.6 trillion budget surplus failed to become reality. Under the rules of the Senate, the amendment needed at least 60 votes to pass and was voted down 49-50 late Monday afternoon.

The debt-reduction trigger would have delayed spending for new government programs and "phased-in" tax cuts like the 11-year elimination of the estate tax until the rate of debt reduction increased.

A House-Senate joint conference committee must now meet to work out a compromise bill reconciling differences between the House- and Senate-approved tax cut bills. Supporters of President Bush's plan have vowed to continue to fight for deeper tax cuts during deliberations of the conference committee.

The bill produced by the conference committee must once again be approved by both the House and Senate before it can be presented to President Bush for his signature. Republican leaders still hold out hopes for having a finished bill on Bush's desk by Memorial Day, May 28.

The future of the tax cut bill could be further clouded by Vermont Sen. James Jeffords' possible jump from the Republican party to the Democratic Party. A party-swap by Jeffords would give the Democrats a 51-49 majority in the Senate, the power to control the legislative agenda, and could alter the leadership of key Senate committees. [See: Bush's Biggest Blunder - Losing Jeffords, by US Politics Guide John Aravosis, and: Shift in Power, by U.S. News Guide Clare Saliba.]

Rebate Checks? Not Yet. Neither the House- or Senate-approved version of the tax cut bill contains a provision for the immediate issuance of tax rebate checks to taxpayers. However, Senate Majority Leader Trent Lott (R. Miss.) has stated that the House-Senate conference committee could still vote to issue rebate checks as a way to stimulate the economy. "I am not a fan of just issuing checks," Sen. Lott told reporters, "but, in order to get the job done, we'll have to consider that."