ROBERT SIEGEL, Host:
This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.
MICHELE NORRIS, Host:
And I'm Michele Norris.
The House of Representatives has approved a $70 billion package of tax cuts. It includes an extension of the reductions in rates paid by investors and protections for middle income taxpayers who might be subject to the alternative minimum tax. Democrats say the cuts favor the wealthiest taxpayers. Republicans argue the measure will keep the economy growing.
NPR's Brian Naylor reports from the Capitol.
BRIAN NAYLOR: President Bush has long wanted to make the tax cuts he pushed through Congress early in his term permanent. Congress hasn't done that, but Republican leaders are doing the next best thing for the president, extending for two more years the reduced rates on capital gains and dividends taxes set to expire at the end of 2008.
In a display of confidence, GOP House leaders held a victory rally on the Capitol steps this afternoon, though a final vote was some hours off. Among the speakers was Treasury Secretary John Snow, who said the tax cuts have fueled economic growth and led to more tax revenues for the government and are keeping the federal budget deficit manageable.
JOHN SNOW: The revenues of the United States government are surging and with this surging revenues, we're going to be in position to see the deficit come down. Clearly on path to to meet and exceed the president's target of cutting the deficit in half.
NAYLOR: But critics say the long-term costs of some of the provisions in the tax cut package will add billions to the deficit down the road. Democrats say the investor tax credits are skewed toward wealthy taxpayers. Florida Democrat Alcee Hastings pointed to the example of a taxpayer earning between $40,000 and $50,000.
ALCEE HASTINGS: Their average tax savings under this particular measure will be $46. That amounts to just a little bit more than a tank of gas if you ain't driving an SUV. But someone who makes $500,000 to $1 million gets $41,000.
NAYLOR: Republicans respond that the economy has shown steady growth and that business investments and the stock market are up. Republican David Dreier of California recalled an adage attributed to Abraham Lincoln.
DAVID DREIER: You can't pull up the wage earner by pulling down the wage payer. And so the standard old argument of class warfare, us versus them, is a tired, worn and failed argument, Mr. Speaker.
NAYLOR: But it's not just Democrats who have been making that argument. Some moderate Republicans, including Senator Olympia Snowe of Maine, are uncomfortable with extending the lower rates for investors. Still, it will be politically difficult for many lawmakers to oppose the bill. That's because it contains a popular provision that would prevent the alternative minimum tax from applying to some 15 million middle-income taxpayers.
The AMT was designed to keep wealthy taxpayers from avoiding taxes, but since it's not adjusted for inflation, its impact has been steadily broadening. Democrats fought to include other middle-income tax relief in the package, including an extension of tuition tax credits. Democratic Senator Charles Schumer of New York says its exclusion from this tax package is an example of what's wrong with Congress.
CHARLES SCHUMER: To give an additional break in 2009 to the wealthiest 1% and take away college tuition deductibility from middle class Americans this year is absolutely wrong.
NAYLOR: Republicans say that provision will be part of a second tax relief measure that is still being negotiated. Even opponents of this package concede it's likely to win approval in the Senate by the end of the week. At a time when Republicans in Washington have had little to cheer, a new round of tax cuts comes as a welcome bit of good news.
Brian Naylor, NPR News, the Capitol.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.