Extension of some tax cuts likely

WASHINGTON — House and Senate Republicans reached agreement Tuesday on a $69 billion bill that would extend President Bush's tax cuts for investors for two more years and temporarily block a big jump in the alternative minimum tax.

The agreement, which has a good chance of passing both chambers later this week, would lock in one of Bush's signature tax cuts through 2010 and give Republicans a victory at a time when most of their other efforts have stalled.

But the bill falls far short of Bush's original goal, which was to make permanent all of his major tax cuts from 2001 and 2003. Nor did Republican leaders work out their differences on a separate measure that would extend scores of other tax cuts that expired at the end of last year.

"We've never had a more difficult melding of both houses' ideas," said Rep. Bill Thomas, the California Republican who is chairman of the House Ways and Means Committee.

Since last fall, House and Senate Republicans have been unable to agree on which tax cuts to include in a special "budget reconciliation" bill that could be passed in the Senate without needing 60 votes to stop a filibuster.

Senate Republicans passed a tax-cut bill last fall that prevented an increase in the alternative minimum tax, a parallel tax designed to stop very wealthy people from taking too much advantage of special tax breaks. Partly because it is not adjusted for inflation, it is engulfing millions more families each year.

Preventing an increase in the alternative minimum tax would cost $34 billion for just one year, so Senate Republicans decided to postpone an extension of the tax cut on stock dividends that would cost about $20 billion over just two years.

House Republicans did the reverse, passing a bill that extended the tax cuts for investors, leaving the alternative minimum tax in a separate bill that could have been blocked by a filibuster in the Senate.

Those tax cuts on dividends and capital gains were the heart of Bush's 2003 tax-cutting package, and Republicans had credited them with spurring a rebound in economic growth in the past three years. They also had support from business groups and Wall Street.

Democrats and some Senate Republicans opposed extending them this year, arguing that the dividend tax cuts would not expire until 2009 and would primarily benefit the top 10 percent of income-earners.