Bush Urges Lawmakers To Extend Tax Breaks
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WASHINGTON – President Bush appealed for quick passage of $70 billion in tax cuts yesterday, saying lower taxes on dividends and profits from investment sell-offs have helped revive the economy.
In addition to extending those cuts by two years, the proposal would keep 15 million taxpayers from getting hit this year with a tax aimed at the wealthy.
The president said raising taxes would harm the economy, especially at a time of rising gasoline prices.
“A tax increase would be disastrous for business, disastrous for families, and disastrous for this economy,” Mr. Bush told a Washington audience.
Republicans are worried about growing voter unhappiness over soaring pump prices in an election year and hope to show that the GOP-controlled Congress can address pocketbook issues. They want to pass long-stalled legislation to extend, through 2010, a 15% tax rate for dividends and capital gains.
Democrats said the idea would appease wealthy investors and do little for the middle class.
“Bush’s tax plan offers next to nothing to average Americans while giving away the store to multimillionaires,” Senate Minority Leader Reid of Nevada said.
Mr. Reid said that the 71% of taxpayers with an adjusted gross income of less than $50,000 saved on average just $10 each from the capital gains and dividend tax cuts, according to a study by the liberal-leaning Citizens for Tax Justice.
But the chairman of the Senate Finance Committee, Senator Grassley, a Republican of Iowa, said a study by the Joint Committee on Taxation showed that the cuts had “given meaningful benefits to taxpayers across the income spectrum, not just the rich.”
Without the extension, the tax rate on capital gains – profits made on the sale of investments – will rise to 20% after 2008. Dividends would be taxed at marginal tax rates as high as 39.6%.
Nearly half of the $70 billion plan – $34 billion – is devoted to extending through the current year a temporary fix intended to protect about 15 million families from paying the alternative minimum tax.
This tax was designed to ensure that the wealthy did not escape paying taxes; over the years, because of inflation, it has ensnared more middle-income people.
Mr. Grassley said Democrats critical of the deal would see their “phones ring off the hook” from angry constituents who will be hit by the tax.
In his speech, Mr. Bush said, “The House and the Senate have got to resolve their differences and pass pro-growth legislation so I can sign it into law.”
Republicans on a House-Senate committee negotiating the tax plan agreed late Tuesday on $70 billion in relief.
Talks yesterday sought to resolve differences over what breaks should go into a second tax bill expected later this year.
Mr. Grassley, who leads the negotiators, has said he will hold up the $70 billion bill until assured that breaks kept out to hold down the total cost will be included in the later tax legislation.
Senate-passed breaks not in the negotiated bill include extensions of a research and development credit for business, a deduction for state sales taxes, a tuition tax credit, and incentives for charitable giving.
“We strongly support the charitable tax incentives in this package, including a charitable deduction for nonitemizing taxpayers,” an executive with the United Way, Paul Thornell, wrote. He said this deduction could boost giving by $1 billion annually.
Senator Baucus, a Democrat of Montana, said the GOP bargainers had provided a “win on capital gains and dividends breaks with not much good news for the average American.”
Mr. Bush, who has made tax cuts his signature domestic issue, renewed his demand that Congress make permanent all of his tax cuts. Reductions in individual income tax rates and others taxes are set to expire in 2010.
Failing to extend the cuts would mean a $2.4 trillion tax increase over the next decade, the president said.
He is hoping a new round of cuts will help bolster his sagging approval ratings. A recent Associated Press-Ipsos poll put Mr. Bush’s job approval rating at 36%, the lowest of his presidency.
Democrats say the country cannot afford to make the cuts permanent, given the record budget deficits, war spending, and costs from the pending retirement of 78 million baby boomers.