The US Senate has approved a scaled-down $350bn tax cut package designed to revive the American economy.
Bush says his tax package will boost America's ailing economy
The package included a key element of President George W Bush's economic strategy - to eliminate dividend taxes on stocks.
Though the cuts were less than half the amount originally sought by Mr Bush, correspondents say the Senate vote will please the White House as it gears up for the president's re-election bid.
Mr Bush sees the revival of the stock market as crucial to bolstering the economy as more than half the population owns stocks.
But the bill - approved in the Senate by 51 votes to 49 - still has to be worked out with the House of Representatives.
Last week, the lower house approved a $550bn tax cut in a parallel bill, in effect rejecting Mr Bush's proposal to eliminate dividend taxes.
Earlier, senators approved an amendment to cut dividend taxes by 51 votes to 50 - with Vice-President Dick Cheney casting the tie-breaking vote.
"Eliminating this punitive double taxation is the right thing to do, it is good policy, it is a critical component of the growth package," said Senator Don Nickles.
The bill eliminates taxes on all dividends in two steps.
In 2003, 50% dividend earnings would be tax free, and then all in 2004 until 2006.
The cut would expire in 2007, when dividends would again be taxed at normal income rates.
Mr Bush had originally sought complete elimination of the double taxation on dividends.