US Congressional negotiators have reached an "understanding" for a tax cut package totalling $382.8bn (£233bn) over 10 years, House Ways & Means Committee chairman Bill Thomas has said.
President Bush: Tax cut proposals watered down
The package is a key part of President George W Bush's plans for re-invigorating the US economy.
But it is much pared down from the Bush administration's initial proposals for $726bn in tax cuts over the next decade.
Proponents of the Bush plan have said it will stimulate economic growth and create jobs. Critics said it would cause the government to run a large, damaging deficit.
Alan Greenspan, the chairman of the US central bank, has warned against the dangers of governments allowing deficits to build up.
On Wednesday, testifying before Congress's joint economic committee, he said: "Deficits do matter and in any evaluation of a [tax cut] programme, whatever happens to deficits is an intrinsic part of the analysis."
Earlier this month, the Congressional Budget Office forecast the US Government would run a record $300bn budget deficit this year.
Dividend tax stays
Mr Thomas said the proposed agreement followed the outlines of a $550bn measure approved by the House of Representatives earlier this month.
It would reduce - but not eliminate, as Mr Bush had wanted - the top rate of tax on shareholder dividends.
And the top rate of capital gains tax would be brought down to 15%, he said.
The speeding-up of already scheduled income tax cuts and tax breaks to encourage business to invest in new equipment would also be included.
But tax breaks for children and married couples would run only until 2005, according to the "understanding".