Tax Cut Passes
By Richard W. Stevenson, New York Times
WASHINGTON, May 26 Congress gave final approval today to the biggest tax cut in a generation, voting to reduce all income tax rates over the next five years and to give the weakened economy a quick jolt by sending rebates to taxpayers this summer.
After days of intense negotiations over how to apportion the tax cut of $1.35 trillion in the next decade and a final round of brief but bitter partisan debate during an unusual Saturday morning session Republican leaders moved the bill quickly through both House and Senate.
The bill passed the House by a vote of 240 to 154, with 28 Democrats and an independent joining all Republicans in voting yes. The Senate then passed it by a vote of 58 to 33.
The legislation gradually reduces the federal estate tax, and then repeals it in 2010. Married couples get a tax break. Contribution limits to 401(k) and individual retirement account programs are increased. The bill creates a deduction for college tuition expenses.
The bill provides for estate tax rates to be reduced and for the amount of an estate exempt from taxation to be increased, from $675,000 currently to $1 million next year and eventually to $3.5 million in 2009. In 2010, the tax will be repealed entirely.
The bill addresses the so-called marriage penalty, the quirk in the tax code that leads many two-income couples to pay higher tax bills than they would if they remained single.
But the main marriage penalty provisions would not begin kicking in until 2005. Starting then, the bill would gradually increase the standard deduction for couples so that it becomes twice the level for single people. And it would expand the 15 percent tax bracket for couples so that it covers twice the income level that the bracket covers for single filers.
Contribution limits for 401(k)-type plans gradually rise to $15,000 from $10,500 under current law. Limits for contributions to individual retirement accounts rise to $5,000 from $2,000.