Senate approves $60 billion tax-cut bill

Reuters
Senate approves $60 billion tax-cut bill

By Donna Smith

WASHINGTON (Reuters) - The U.S. Senate on Friday voted to extend $60 billion in tax cuts for individuals and businesses but added a $5 billion tax on big oil companies, drawing a veto threat from the White House.

The tax package passed on a 64-33 vote only after the Senate dropped provisions that would have kept in place tax-rate reductions for capital gains and dividends beyond their expiration in 2008. Democrats and some moderate Republicans put up solid opposition to those investor provisions backed by the White House.

The tax legislation is part of a broader effort by congressional Republicans to maintain Bush's tax cuts while trimming domestic spending to reduce deficits.

The House of Representatives early on Friday passed a $50 billion package of spending cuts on social programs, student loans and farm subsidies that Democrats and some moderate Republicans said put too much of the deficit-reduction burden on the poor.

The overall cost of the Senate's tax-cut legislation was trimmed by a number of measures to raise revenues, including an accounting provision that would raise about $5 billion from big oil companies by temporarily changing the way they value oil inventories.

A White House statement said President George W. Bush's advisers would recommend a veto if the oil provision remains in place through negotiations with the House. Conservative Republicans will likely insist the accounting change be dropped. But Democrats criticized the White House's position.

"It is amazing that even this White House, which is of, by, and for the big oil companies, would threaten to use its first veto ever to help its big oil buddies even at a time when they're rolling in record profits," said Sen. Charles Schumer, a New York Democrat who sits on the Senate Finance Committee.

The House will likely take up its version of the tax cut legislation when lawmakers return in early December after a Thanksgiving holiday break.

The House bill would extend for two years a 15-percent tax rate for capital gains and dividends. A similar provision was dropped from the Senate bill to overcome opposition from moderate Republicans and Democrats.

The investment tax breaks were the cornerstone of Bush's 2003 tax cut and will expire at the end of 2008 if Congress fails to act. The capital gains rate would then go to 20 percent and dividends would be taxed at regular income rates.

The Senate bill includes about $7 billion in tax breaks to help rebuild regions destroyed by Hurricane Katrina and other provisions to encourage charitable giving.

The Senate bill also extends a number of tax breaks for business, education and savings that otherwise would expire at the end of the year. Among them is a $30 billion measure that would keep millions of taxpayers from paying the alternative minimum tax next year -- a tax originally intended for the very wealthy.

(Additional reporting by Tom Doggett)