US Congress Finally Agrees Tax-Cutting Compromise

by Mike Godfrey, Tax-news.com, New York

28 May 2001

Following Senate approval of the 11-year, $1.35 trillion tax-cutting package, House and Senate negotiators were quick to reach agreement on a compromise between the two versions of the package, announcing its final shape last Friday evening.

The deal was reached in meetings all day Friday between Republicans Bill Thomas (House Ways and Means Committee chairman) and Charles Grassley (Senate Finance Committee chairman) and Democratic Senators Max Baucus and John Breaux.

The measures include across-the-board reductions in higher income tax rates and the creation of a new 10% tax bracket at the bottom of the scale, below the current lowest bracket of 15%. In the upper tax brackets, the top 39.6% rate will be brought down to 35% by 2006, the 36% rate to 33% and the 31% rate to 28%. Business groups got what they wanted with an increase in the estates tax minimum barrier from $675,000 now to $3.5m in 2009, with complete repeal in 2010.

The tax cuts are retroactive to the beginning of 2001, so single filing taxpayers will receive a $300 refund this year, with joint filers receiving $600. Child tax credit, currently at $500, will be doubled by 2010, and there will be increases in permitted contributions to retirement investment accounts.

The package will be voted on by the House of Representatives on Saturday morning and will receive a Senate passage later in the day. It can be assumed that the President won't veto it!

Mr Bush commended both Republican and Democratic politicians for their support. "As a result of this landmark tax relief agreement, the American taxpayers will have more money in their pockets to save and invest and the economy will receive a much-needed shot in the arm," he said in a statement.

Echoing that sentiment, Sen. Charles Grassley, (R - Iowa), chairman of the Senate Finance Committee (for a few more days), said: "This tax bill is a victory for Republicans. It's a victory for Democrats. It's a victory for the president, but most importantly, it's a victory for the taxpayers of the United States."

Both men want to make the most of the bi-partisan compromise that has been reached, hoping to be able to have at least some influence in how the Senate approaches other and even more contentious items on the Republican agenda, now that it is in the hands of the Democrats.

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