|Tax Cuts Approved by Congress|
Dateline: May 27, 2001
American taxpayers will receive refund checks of up to $600 this year as part of the ten-year, $1.35 trillion compromise tax cut plan just approved by Congress and now awaiting President Bush's signature. Bush has stated he will sign the bill after Congress returns from the Memorial Day recess on June 5.
Meeting in a rare weekend, pre-holiday session, Congress on Saturday gave its final approval to the deepest tax cuts since 1981. The compromise bill reduces all income tax rates by three percentage points by 2006.
In the House, the bill won the votes of 211 Republicans, 28 Democrats and one independent. One independent and 153 Democrats voted against it.
In the Senate, 12 Democrats voted for the bill, as did 45 Republicans and newly independent Sen. Jeffords of Vermont. Republican Senators McCain of Arizona and Chaffee of Rhode Island joined 31 Democrats in voting against the bill.
The first and perhaps most visible tax relief to be seen by most taxpayers will arrive in their mailboxes as one of 95 million lump-sum refund checks scheduled for delivery in August and September, according to Treasury Department officials.
Single taxpayers will receive up to $300, single parent filers up to $500 and married couples up to $600. The refunds are part of a $100 billion package President Bush hopes will help stimulate the economy.
Among details of the final tax cut package are:
- Top tax rate of 39.6 percent drops to 35 percent by 2006
- The 36 percent tax rate drops to 33 percent
- The 31 percent tax rate drops to 28 percent
- The 28 percent tax rate drops to 25 percent
- Child tax credit doubles from $500 to $1000 per child by 2010
- Federal tax on large estates is eliminated by 2010
- Relief for the marriage penalty tax is provided
- Contribution to education savings accounts raised from $500 to $2000
- IRA contribution limit increases from $2,000 to $5,000 per year
- 401(k) plan contribution limit increases from $10,500 to $15,000 per year
The plan also creates a new 10 percent tax rate, effective from Jan. 1, 2001. The lump sum refund checks to be mailed late this summer will reflect the retroactive adjustment.
Tax Cuts Carried High Political Costs
The $1.35 billion in tax cuts approved by Congress fell short of the total $1.6 trillion originally sought by President Bush. The White House proposal would have reduced the top tax rate to 33 percent, rather than the 35 percent approved in the Congressional compromise.
Democrats in both the House and Senate opposed the Bush plan as being too costly, thus endangering the government's ability to continue its efforts at paying off the national debt. Others opposed the plan as being to favorable to high income earners while doing too little to stimulate the economy.
Many moderate Republicans also expressed strong displeasure with President Bush's tax cut proposal, leading to the stunning decision by Vermont Sen. James Jeffords to leave the Republican Party and serve as an independent. Jeffords' move gave the Democratic Party a 50-49 majority in the Senate, thus dealing a severe blow to the president's ability to enact future programs of his conservative agenda.
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After Saturday's votes, both the House and Senate adjourned for the Memorial Day recess and will return to work on June 4.