WASHINGTON – Now and for years to come, every American who pays income taxes will benefit from the $1.35 trillion tax cut bill that reflects the major goals President Bush outlined during his campaign for the White House.
Most visible are around 96 million tax refund checks of between $300 and $600 to be mailed to taxpayers beginning July 20. But much of the tax bill's relief occurs slowly over the next decade, including across-the-board reductions in income tax rates that will mean more take-home pay for all taxpayers.
"You are going to get a check and then you are going to get, in every paycheck, a reduced bite," said Rep. Bill Thomas, R-Calif., chairman of the tax-writing House Ways and Means Committee.
Bush was scheduled to sign the bill into law Thursday morning at the White House, joined by a bipartisan group from the House and Senate. Passage of the legislation May 26 marked the biggest legislative victory in Bush's young presidency and follows years of Republican frustration as former President Clinton blocked or vetoed previous tax cuts.
Rep. J.C. Watts of Oklahoma, the fourth-ranking House Republican, told colleagues in a memo that as the refund checks go out to constituents, Republicans should "take every opportunity to remind them who is working to give them more of their own money back to meet their own priorities, not Washington's."
In addition to the refund checks and income tax cuts — which include creation of a new 10 percent bottom rate — the measure eventually abolishes the estate tax, eases the marriage penalty paid by millions of two-income couples, gradually doubles the $500 child credit and contains breaks for increased retirement savings and education.
While the bill got significant Democratic support, most Democrats criticized it as far too large to meet other national priorities, such as increased spending on education and a Medicare prescription drug benefit, and would cost at least $4 trillion in the second decade. They contend it remains unfairly tilted toward the wealthy, even though several provisions were added by Senate moderates to benefit lower-income people.
Democrats now control the Senate, due to Vermont Sen. James Jeffords' switch from the GOP to independent. New Senate Majority Leader Tom Daschle of South Dakota said there would be no immediate effort to undo the tax cut but predicted changes in coming years — particularly since most provisions expire on Dec. 31, 2010, under Senate budget rules.
"We don't have the votes to revisit it today with any success," Daschle said Wednesday. "I just know that at some point, that reality is going to come crashing down on all of us, and we're going to have to deal with it."
House Republican leaders said they will attempt to pass legislation this year to eliminate the "sunset" expiration date and make the tax cuts permanent. The Democratic majority in the Senate, however, could make it difficult for that measure or any other House GOP tax cuts to pass this year.
"This debate is over," said Mike Siegel, spokesman for new Senate Finance Committee Chairman Max Baucus, D-Mont. "We passed a strong bipartisan bill through months of negotiation. It's important that we turn our attention to other critical priorities."
Yet Republicans promised to press ahead with more tax relief, possibly including cuts in capital gains taxes, energy tax breaks, a package of cuts for small business to accompany an increase in the minimum wage and extension of several provisions that expire this year.
"This tax bill is the beginning, not the end," said House Majority Leader Dick Armey, R-Texas.
One other looming problem is the alternative minimum tax, which will limit the tax cut's benefits for millions of people in the coming years. Because it was never indexed for inflation, more taxpayers find themselves snared by the tax as their incomes rise. Official estimates say the tax, which affected just 1.4 million taxpayers this year, will hit 35.5 million in 2010.