House tax vote sets up tough debates
WASHINGTON -- Congress is in a late-session gift-giving mood, but until the House and Senate reconcile competing tax relief bills, it will be hard to tell whether the big winners will be the middle class or the well heeled -- or both.
The two chambers face tricky negotiations on two very different versions of a tax cut called for months ago, and it isn't clear how soon this will be resolved.
Multiple factors conspired to delay this year's tax work. Hurricane Katrina blew pending tax bills off the agenda so tax-writers could turn their attention to helping the Gulf Coast cleanup and recovery.
GOP leaders spent a good part of the fall marshaling support for their effort to shave the growth of federal programs like Medicare and Medicaid. Some moderate GOP lawmakers were less than enthusiastic about the prospect of cutting taxes amid budget deficits and emergency hurricane costs.
Lawmakers haven't given up hope of completing the tax cut this year, but there are few days left for tax writers to reconcile very different versions of their legislation.
The House voted 234-197 to pass its tax cut Thursday. The bill focuses on reduced tax rates for capital gains and dividends, preserving the 15 percent tax rate for investment income in 2009 and 2010 that otherwise will evaporate at the end of 2008.
It also would preserve tax cuts scheduled to expire in just a few weeks, including popular deductions for state and local sales taxes and tuition, along with a tax credit for low-income savers.
The Senate's version of the bill, passed last month, focuses instead on the alternative minimum tax. Their bill seeks to temporarily hold back the tax next year, when it could hit more than 17 million individuals and families with higher taxes.