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The BBC's Johnny Dymond
"President Bush remains on shifting political ground"
 real 56k

Saturday, 26 May, 2001, 20:59 GMT 21:59 UK
US Congress passes tax cuts
Senn. Charles Grassley (L) R-Iowa, Sen. Max Baucus (C), D-Mont and Sen. Trent Lott, (R) R-Miss
Senators congratulated each other on the package
US President George W Bush has hailed Congress's approval of the largest tax-cutting package in a generation, calling the cuts "profound" and "fair".

The Senate passed the bill 58-33 on Saturday, only hours after the House of Representatives approved it by a vote of 240-154.

The passage comes after US House and Senate negotiators worked late into Friday night to reach a final compromise agreement on the 11-year, $1.35 trillion tax-cutting package.

As a result of this landmark tax relief agreement, the American taxpayers will have more money in their pockets

George W Bush
The bi-partisan agreement is a less radical version of Mr Bush's tax proposals, which came up against considerable opposition in Congress.

The measures include across-the-board reductions in higher income tax rates and the creation of a new 10% tax bracket at the bottom of the scale, below the current lowest bracket of 15%.

Because the tax cuts are retroactive to the beginning of 2001, individual taxpayers will receive a refund of up to $300. Single parents will get up to $500, and married couples up to $600.

Boost to economy

"That immediate tax relief will provide an important boost at an important time for our economy", said Mr Bush, who cut short a weekend at the Camp David presidential retreat to return to Washington and welcome the Congressional votes.

Senator Jim Jeffords of Vermont, who is leaving the Republican party
The loss of Mr Jeffords is a problem for Mr Bush
Our correspondent says that, despite being smaller than what Mr Bush had proposed, a tax cut of this scale was politically unthinkable six months ago and the speed with which it has been passed is another victory for the administration.

Those victories may be the last for some time. The defection of Republican Senator Jim Jeffords on Thursday, which gave control of the Senate to the Democrats, will make passing legislation much more difficult for the administration.

In another possible warning sign for Mr Bush, two Republican senators - John McCain of Arizona and Lincoln Chafee of Rhode Island - voted against the tax cut.

Twelve Democrats supported it.

Liberal criticism

Mr Bush had campaigned for a $1.6 trillion tax cutting package but it did not survive weeks of intense debate by both houses of Congress.

This is good short-term politics. It is disastrous long-term policy

Tom Daschle,
Senate Democrat
Many Democrats have criticised the reduced tax cuts, saying even they are too big and will harm federal health care and pensions programmes.

"This is good short-term politics. It is disastrous long-term policy," said Senator Tom Daschle, the Democrat who is to become Senate Majority Leader.

Liberal and anti-poverty groups have condemned the bill as boosting the incomes of the rich.

But on Saturday, Mr Bush said the programme would "cut income taxes for everyone who pays them. Nothing could be more profound and nothing could be more fair."

US President George W Bush
Mr Bush said the plan was fair to all taxpayers
In the upper tax brackets, the top 39.6% rate will be brought down to 35% by 2006, the 36% rate to 33% and the 31% rate to 28%. Mr Bush had sought a top rate of 33%.

Business groups have been lobbying hard for repealing inheritance taxes. Currently, estates worth up to $675,000 are exempt from inheritance tax; under the deal, the figure will rise to $3.5m in 2009, with complete repeal in 2010.

Child tax credit, currently at $500, will be doubled by 2010, and there will be increases in possible contributions to retirement investment accounts.

Mr Bush is expected to sign the bill into law around 5 June, after the US Memorial Day holiday.

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See also:

24 May 01 | Americas
Rebel tips US Senate balance
12 Feb 01 | Business
President Bush's tax cure
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