Senate OKs $70 billion tax-cut bill

WASHINGTON — The Senate gave final approval Thursday to a $70 billion election-year package of tax cuts that will extend lower rates for investors and also save billions for families with above-average incomes.

The Senate passed the measure by a 54-44 vote, clearing it for President Bush's signature.

The legislation provides a two-year extension of the reduced 15 percent tax rate for capital gains and dividends, currently set to expire at the end of 2008.

It also will extend for one year recent changes to the alternative minimum tax — originally aimed at making sure the wealthy pay at least some taxes — to prevent it from hitting more upper-middle-income families.

It is now common for taxpayers, especially those with families in high-tax states, to pay the AMT on incomes of $100,000 and more.

The bill also will extend for two years provisions sought by small businesses to let them write off up to $100,000 in investments in equipment and other expenses.

The debate followed partisan lines, with Republicans eagerly crediting the tax cuts, first enacted in 2003, with a surging economy, millions of new jobs and booming tax revenues. Democrats overwhelmingly opposed the bill, saying its tax cuts on capital gains and dividends will flow mostly to the wealthy.

Just three Republicans — Olympia J. Snowe of Maine, Lincoln Chafee of Rhode Island and George Voinovich of Ohio — voted against the bill. Democrats Ben Nelson of Nebraska, Bill Nelson of Florida and Mark Pryor of Arkansas voted in favor.

Republican Gordon Smith of Oregon originally registered a "nay" vote but changed to "aye" just before the tally was announced.

Republicans said to fail to extend the tax cuts would amount to a tax increase on investors, big and small, as well as on families facing the alternative minimum tax. They've dubbed the bill the "Tax Increase Prevention Act."

"Are we going to increase taxes on well over 100 million people . . . or are we going to keep takes low?" said Majority Leader Bill Frist, R-Tenn.

Appearing with Frist and other GOP senators, Treasury Secretary John Snow said, "This is a defining day. A vote today will tell the American people who supports lower taxes and who doesn't."