Lawmakers debate depth of potential tax cut

President Bush speaks to small-business owners at MCT Industries in Bernalillo, New Mexico.

President Bush traveled to three states on Monday to promote his proposal to cut taxes. Bush believes that his plan will stimulate the struggling U.S. economy, though some critics do not think the ends would justify the means.

The president spoke to factory workers about his plan in New Mexico on Monday, and afterward he headed to Nebraska to visit a plastics manufacturing plant. His day concluded in Indiana, where he is scheduled to meet with senior citizens at the state fairgrounds on Tuesday.

Throughout his trip, Bush repeated his call for deep tax cuts while lawmakers on Capitol Hill debated several tax cut bills. On Friday, the House of Representatives approved a $550 billion tax reduction, but that figure is far less than the president's initial proposal of a cut exceeding $700 billion.

The bill approved by the House focuses on cutting taxes on stock dividends and capital gains - money made from selling an asset. It also aims to lower income taxes, raise the child tax credit, which can help parents financially, and eliminate the marriage penalty, which often causes married people to pay more in taxes than they would if they were not married.

RESOURCES • CNN.com: Lawmakers wrestle with competing tax-cut plans  • CNN.com: Bush steps up pressure on lawmakers to support tax cuts  • CNN.com: Bush campaigns for tax cuts  • CNN.com: House approves tax-cut bill  • Interactive: Bush economic plan   • Interactive: Competing tax plans   • U.S. Constitution: Sixteenth Amendment  • False Arguments for Noncompliance with the Tax Laws  • Internal Revenue Service  • U.S. Department of the Treasury  • Holt, Rinehart and Winston: The U.S. Constitution

The U.S. Senate is considering a different bill this week that calls for a $350 billion tax cut. It differs from the House bill on the taxation of stock dividends - money companies pay their stockholders. The Senate bill also raises taxes in other areas in order to pay for the proposed cuts.

Supporters of the president's proposal say large tax cuts will benefit Americans and help bolster the U.S. economy. "If enacted by Congress - and we're getting closer - it will create an enormous number of new jobs..." said Treasury Secretary John Snow, adding that the plan could create more than two million new jobs by 2005.

However, critics say that deep tax cuts would mainly benefit wealthier taxpayers and lead to an increase in the national debt. Democratic leader Tom Daschle said that many lawmakers "support a tax cut, but not when you are going to build the [national] debt to the extent" that the Bush administration proposed. "We can't do that," Daschle said.

Once the Senate approves a plan, a conference committee can work to achieve a compromise between it and the House bill. President Bush hopes that process can be completed quickly.

The 16th Amendment to the Constitution gives the U.S. government the power to tax its citizens on the money they earn. It was ratified in 1913.