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US House Vote Opens Way For Tax Cut Extensions

by Mike Godfrey,, Washington

10 May 2007

A vote in the US House of Representatives has left the door open to the partial extension of some tax cuts passed during the first term of President George W. Bush's presidency.

In a non-binding vote on Tuesday evening, the House voted 364 to 57 to instruct lawmakers negotiating a five-year budget plan with the Senate to abandon the requirement that all of Bush's tax cuts be offset with tax increases elsewhere. This effectively leads to the possibility of net tax cuts worth $180 billion in 2011 and 2012.

However, lawmakers from both parties believe that Congress will be unlikely to decide whether to extend the tax cuts until the next presidential election, due in 2008.

Nevertheless, the White House welcomed the House vote, and Office of Management and Budget Director Rob Portman said in a statement that: "It demonstrates that 167 Democrats do not believe that continuing the tax relief must be paired with other tax increases."

The Senate version of the 2008 budget, agreed in a 97 to 1 vote during floor debate in March, includes similar provisions for a $180 billion tax cut in 2011 and 2012, leaving room for the extension of a number of existing tax measures, including the 10% tax bracket, the so-called 'marriage penalty' relief, a higher earned-income tax credit, an adoption credit, a higher child-care tax credit and a lower estate-tax rate and higher exemptions.

The vote signals that Democrats, who now control Congress, are more receptive to the idea of extending tax cuts, after dire warnings from senior Republicans that budget resolutions passed in both the House and Senate would lead to a massive increase in taxation as the Democrats look to restore fiscal discipline and add extra funding to entitlement programs.

Speaking last month, Chuck Grassley, Ranking Member of the Senate Finance Committee said that if something is not done to extend or make permanent tax relief before the end of 2010, American families will be hit with "a wall of tax increases". Citing US Treasury figures, he claimed that a family of 4 with $40,000 in income will be subjected to an average tax increase of $2,052 all at once.

The House vote comes as Congressional leaders prepare to launch conference negotiations between House and Senate on the final version of the 2008 Budget Resolution, which serves as a non-binding template for tax and spending plans for the next five years.

On Tuesday, the House named Senate Budget Committee John Spratt (D - SC), Ranking Member Paul Ryan (R - Wi), Rep. Rosa L. DeLauro (D - Ct), Rep. Chet Edwards (D - Tx) and Rep. J. Gresham Barrett (R - SC) as conferees for the 2008 Budget Resolution.

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