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Last Updated: Friday, 23 May, 2003, 19:57 GMT 20:57 UK
$350bn Bush tax plan finally passed
President Bush
President Bush wanted $726bn in cuts
The US Congress has finally approved President George W Bush's tax-cut package priced at $350bn, less than half the figure the administration initially wanted.

The House of Representatives and the Senate both approved the 10-year plan, which the White House says is aimed at stimulating the flagging US economy.

The plan has been controversial, since many economists argue it will increase the US deficit and therefore undermine the dollar, without necessarily benefiting many Americans.

In the Senate, the casting vote of Vice-President Dick Cheney was required to get the scheme passed.

Later on Friday, the Senate also approved - by a rather more confortable 53-44 margin - an increase of almost one trillion dollars (610bn) in the amount the federal government is allowed to borrow.

And in a unanimous vote, the Senate also finally signed off on a further six months of unemployment insurance, which would otherwise have lapsed on Friday leaving hundreds of thousands of job-seekers without benefits.

'Itty-bitty'

Mr Bush, and his supporters, immediately declared the bill a victory - even if he had at one point described the $350bn figure as "itty-bitty" compared to what he had originally sought.

The bill, said Stephen Moore, head of the conservative Club for Growth political action committee, "has enough stimulus punch that it will help the economy before the election".

But critics charge that not only will the programme fail to deliver the growth its sponsors promise while driving the US still further into the red, but its cost will far exceed the "sticker value".

Even the conservative Wall Street Journal has voiced concern, saying that the bill includes gaping loopholes that effectively mean the super-rich can avoid paying taxes altogether.

'Looting'

Senate Democrats have pointed out "sunset" provisions which dissolve many of the bill's tax breaks after a few years, and which are commonly later made permanent.

These, they say, would inflate the true cost to more than half a trillion dollars.

"This tax bill is one of the most dangerous and destructive and dishonourable acts of government that I have ever seen," said Sen. Mark Dayton from Minnesota.

"It is a shameful looting of the federal treasury by the rich and powerful in America, compliments of their friends in Congress."

Others warned that by skewing the tax cuts towards the already wealthy, little new spending would result, at a time when state governments are slashing spending to keep from going effectively bankrupt.

The bill does include $20bn in emergency funding for the states.

Sunset

The main plank of the bill is a staged cut in dividend and capital gains taxes, a key aim for the so-called "neo-conservatives" running the Republican party.

The top rate will drop to 15% from 2003 to 2008, with lower-income taxpayers - whom the taxes normally barely affect in any case - paying 5%, instead of the normal 20% rate on capital gains and standard income tax rate on dividends.

In a compromise designed to keep the headline figure below $350bn, both are set to return to normal in 2008.

Several Senate Republicans had said they would refuse to back a bill whose price was more than $350bn, and the sunsets, whether or not they are eventually observed, allow them to save face.


SEE ALSO:
Bush compromises on tax plans
22 May 03  |  Business
Bush budget woes mount
20 May 03  |  Business
US Senate backs Bush's tax plan
16 May 03  |  Americas
Bush's tax cut politics
13 May 03  |  Business
Bush sells tax cuts to voters
12 May 03  |  Business
House approves $550bn tax cut
09 May 03  |  Business
Senators approve US tax cut deal
09 May 03  |  Business


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