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Senate OKs $1.35 trillion tax cut

Bill now heads to conference committee

James Jeffords
Vermont Sen. Jeffords, who is considering leaving the Republican party, voted in support of tax cuts.  

WASHINGTON (CNN) -- After two days of delay caused by a flurry of amendments, the Senate, in a 62-38 vote, gave its approval Wednesday to an 11-year, $1.35 trillion tax cut compromise.

The tax cut measure -- the centerpiece of President Bush's legislative agenda -- will now go to a conference committee, where legislators will hammer out differences between House and Senate versions of the bill. The House had earlier approved a $1.6 trillion tax cut closer to what Bush originally proposed.

"We're dealing with a very important issue, and we're not going to deal with it in a sloppy fashion," Sen. Charles Grassley, R-Iowa, said of the work ahead for the conference committee. Grassley is chairman of the Senate Finance Committee.

U.S. Senate approves tax bill 62-38 (May 23)

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"There will be a lot meetings, a lot of discussion. That's the democratic process," said Sen. Max Baucus, D-Montana, the ranking minority member of the finance panel.

The president has called for final passage of a tax cut package by Memorial Day. But the final shape of the tax cut was thrown into uncertainty Wednesday by news that Sen. James Jeffords, R-Vermont, is considering leaving the GOP, which could toss control of the chamber to the Democrats.

Senate Minority Leader Tom Daschle, D-South Dakota, who could wind up as the new Senate leader, voted against the tax cut bill. Jeffords, despite his ruminations over switching parties, supported it on the final vote.

The bill passed by the Senate is virtually identical to the measure that came out of the Senate Finance Committee, a bipartisan compromise co-authored by Grassley and Baucus.

Dozens of amendments, many designed to scale back the scope of the tax cut, were defeated. Senate Republican leaders had planned to pass the bill on Monday, but lengthy debate on the amendments delayed the final vote until Wednesday afternoon.

The bill would reduce the highest tax rate from 39.6 percent to 36 percent by 2007. Bush and some of his conservative allies had wanted that rate lowered to 33 percent.

In addition to lowering the top tax rate, the legislation drops the tax rate in the middle brackets: from 36 percent to 33 percent, from 31 percent to 28 percent and from 28 percent to 25 percent.

It also lowers the tax rate in the bottom tax bracket from 15 percent to 10 percent and makes the change retroactive to January 1, 2001. That would provide a $300 tax cut for single taxpayers and $600 for married couples, designed to provide a stimulus to the economy.

While the Bush administration had wanted that money refunded directly to taxpayers, the Senate bill returns the money over time by adjusting tax withholding tables.

The Senate bill phases out the estate tax and the so-called "marriage penalty," but on a slower timetable than Bush wanted. The estate tax wouldn't be completely phased out until 2011, while the marriage penalty relief wouldn't be fully phased in until 2010.

Senate votes
The Senate finally commences voting on budget cuts on Wednesday.  

The child tax credit will rise $100 per year until it reaches $1,000 in 2010.

Earlier this week, the White House expressed extreme displeasure with the speed of developments in the Senate. President Bush had urged Congress to get him a finished bill by Memorial Day -- next Monday.

White House press secretary Ari Fleischer had said the president was "very concerned" about the bill because it kept "getting slowed down, bogged down and delayed."

"The president calls on the Congress to take action in the Senate today, to take action now so that tax relief can be enacted into law," Fleischer said.

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