WASHINGTON – The Senate gave final approval yesterday 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.

Republicans promised the bill will produce economic gains for the nation – and hoped it would give a much needed boost to President Bush and the GOP-controlled Congress as they both experience their lowest approval ratings in polls since his election in 2000.

The bill passed the Senate by a 54-44 vote, and Mr. Bush is expected to sign it next week. The legislation provides a two-year extension of the reduced 15% 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 to prevent it from hitting more upper middle-income families.

The AMT was designed to hit the very wealthy, but 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 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 wealthy.

Just three Republicans – Olympia 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.

Republicans said to fail to extend the tax cuts would amount to a tax in crease 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 taxes low?” said Majority Leader Bill Frist, a Republican of Tennessee.

Democrats countered that Republicans were favoring the wealthy and even oil companies while letting languish Senate-passed tax breaks on college tuition and state and local sales taxes, as well as a research and development tax credit for businesses.

Also in Congress yesterday, the House approved a $512.9 billion military bill that addresses a host of concerns arising from wars in Iraq and Afghanistan, from combatting makeshift roadside bombs to equipping more vehicles and troops with armor.

Passed on a 396-31 vote, the measure includes a plan to spend $50 billion for the first part of next year’s war costs.

“With this bill, we continue to support them by providing equipment, training, resources, and peace of mind for their families,” said Rep. Ike Skelton of Missouri, the committee’s top Democrat.