President George W Bush has signed into law a $70bn (£37bn) tax cut which he says will boost the US economy.
Mr Bush described the cuts as part of a pro-growth economic policy
Republicans hope it will help them keep control of Congress in November's mid-terms elections, analysts say.
The cut comes as a poll indicates public confidence in the Republican Party has reached a new low.
Mr Bush says his "pro-growth economic policies are working for all Americans". Democrats say the cuts are irresponsible and favour the wealthy.
While signing the legislation on Wednesday, Mr Bush said: "This is a good day for American workers and families and businesses."
He praised Republican members of Congress, saying: "You have passed a bill that will keep our taxes low and keep our economy growing."
The package - an extension of previous tax cuts - was approved last week by both the House of Representatives and the Senate.
The BBC's James Coomarasamy in Washington says securing it has provided a rare legislative victory for Mr Bush ahead of the mid-terms.
The move comes as a new opinion poll showed that 56% of Americans would like to see the Democrats regaining a majority in both houses of Congress.
Reducing taxes has been one of Mr Bush's signature policies, giving him a welcome opportunity to remind his Republican base of the importance of retaining control of Congress, our correspondent adds.
Democrats opposed the bill, saying tax cuts on capital gains and dividends would help only the rich.
Its provisions include a two-year extension of reduced tax rates for capital gains and dividends, which were set to expire at the end of 2008.