WASHINGTON – President Bush went to Capitol Hill Thursday to thank House and Senate Republicans for narrowing their differences over this year's tax bill.
The president claimed victory on the economic package, although the tax cuts were less than half of what he had requested. Bush once called a $350 billion tax-cutting plan "itty bitty."
Lawmakers finalized the deal Wednesday. On Thursday, the president indicated he was happy with it.
"This is a Congress which is able to identify problems facing the American people and get things done," Bush told reporters after the meeting Thursday. "I'm real proud of the work they've done."
Bush said he wants to sign the economic package "soon."
"This bill I'm going to sign is good for American workers, it's good for American families," Bush said. "The principle of the bill is pretty simple -- that we believe the more money people have in their pockets the more likely it is somebody is going to be able to find work in America."
Senate Finance Committee (search) Chairman Charles Grassley, R-Iowa, said in a written statement that the package will help ease economic anxiety.
"It'll pump up our consumer-driven economy. It'll put more money in individuals' and families' pockets," he said.
Bush also thanked Congress for passing the $15 billion global AIDS bill (search) this week and sending it to his desk for his signature. When Congress returns from the Memorial Day recess, Bush looks forward to working on the issue of Medicare reform, the president said.
The tax measure cuts the taxes on capital gains and stock dividends, but does not eliminate them. Elimination of these dividends was a cornerstone of Bush's proposal. It also speeds up the income-tax cuts approved in the 2001 deal.
The package still ranks as the third-largest tax cut in the nation's history.
The $350-billion package is less than half the $726 billion the president proposed. The White House had said it would settle for the $550 deal the House originally passed but even that was too low.
House and Senate leaders want to complete work before Memorial Day, in time for the Treasury to start sending $400 to 25 million households that qualify for an increased child-tax credit.
Facing nearly unanimous opposition from Democrats, negotiators worked all day to squeeze out a bare majority of votes in the narrowly split Senate.
"We do have 50 votes," Senate Majority Leader Bill Frist, R-Tenn., said when he announced the agreement.
Supporters will need the tie-breaking vote of Vice President Dick Cheney (search) if wavering moderates decide to oppose the bill. Senate leaders count Democrats Ben Nelson of Nebraska and Zell Miller of Georgia as votes for the bill, but they lost the support of three Republicans -- Lincoln Chafee of Rhode Island, John McCain of Arizona and Olympia Snowe of Maine.
Most Democrats have objected to the tax cut ever since Bush proposed the idea early this year. "It gives away billions to those who need it least and does very little for those who need it most," said Senate Minority Leader Tom Daschle, D-S.D.
The agreement combines about $330 billion in tax cuts with $20 billion in aid to fiscally strapped states, half earmarked for Medicaid. House Energy and Commerce Committee Chairman Billy Tauzin, R-La., said he and other members of the panel plan to vote against the bill if it retains the Medicaid spending.
Negotiators clinched the deal -- and won the crucial support of George Voinovich, R-Ohio -- by reducing a $383 billion outline sketched out late Tuesday night to $350 billion. They agreed to trim a year off a policy that cuts taxes on dividends and capital gains to 15 percent, and 5 percent for low-income taxpayers. Dividends are currently taxed at rates up to 38.6 percent, and capital gains at 20 percent.
The tax cut on dividends and capital gains will expire in 2008, a year earlier than negotiators had originally intended. The change cut the cost of the policy from $179 billion to about $150 billion.
Voinovich met with Cheney for more than an hour Wednesday afternoon, working toward an agreement. Concerned that the tax cut would worsen record deficits, Voinovich had secured a promise from Grassley that the final legislation would cost no more than $350 billion over the next decade.
"If they stay within the 350 [billion], I'm fine," Voinovich said. "I appreciate the fact that they've been trying to honor my concerns and make me an honest man."
The foundation of the agreement includes the basic elements proposed by the president, but many expire in a few years. The agreement would cut taxes on wages by permanently reducing income tax rates.
Other provisions aimed at cutting taxes for individuals and families would start retroactively on Jan. 1 and expire in 2005. Those items reduce taxes for married couples, increase the child tax credit from $600 to $1,000, expand the lowest tax bracket and prevent more taxpayers from paying the alternative minimum tax.
Small businesses could expense up to $100,000 in new equipment investments through 2005, and businesses could depreciate more of their assets through 2004.
The agreement dropped the tax and fee increases that had been added to the Senate's tax cut to pay for items in the bill that exceeded the $350 billion limit imposed by the budget. Those items had extended customs user fees, closed corporate tax loopholes and ended a tax break for Americans working abroad.
Negotiators also dropped small tax favors in the Senate bill. They cut taxes for narrow interests that ranged from specialty gunsmiths to bow and arrow manufacturers to alcohol distillers. It also drops tax cuts for military personnel and proposals to simplify the tax code.
The Associated Press contributed to this report.