WASHINGTON – The House voted Thursday to lock in a tax cut on the first $7,000 in wages earned by workers, the third in a series of bills highlighting President Bush's tax cutting record.
"Today is the chance that we have to help all working Americans," said Rep. Mark Green, R-Wis.
The bill, passed 344-76, makes permanent the bottom tax bracket (search) created in 2001, when taxes on the first $6,000 in wages were lowered from 15 percent to 10 percent. In 2003, Congress expanded the bracket to cover the first $7,000 earned.
Without action, the bracket shrinks back to $6,000 next year and disappears completely in 2011.
Lawmakers want to extend three popular tax cuts slated to disappear at the end of the decade, including the broad bottom tax bracket. The House has already voted to preserve tax cuts for married couples, and plans a vote next week to lock in the $1,000 child tax credit (search).
Senate tax writers plan to combine all three into one bill later this year.
House Democrats gave the tax bracket bill strong support, despite criticism that the GOP's $218 billion, 10-year tax cut worsens budget deficits at a time of war.
"This debate isn't about whether we should provide tax relief to middle class families," said Rep. Charles Stenholm, D-Texas. "The debate is whether we should do so with borrowed money."
The House voted 227-190 to reject a Democratic alternative that would have kept the expanded bottom bracket in place through 2010. That tax cut would have been covered by a 1.9 percent surcharge on individuals who earn $500,000 or more and couples who earn $1 million or more.
After 2010, the bottom bracket would have remained only if White House budget officials project that the federal budget would be balanced by 2014.
"We don't want our grandkids to pay higher taxes tomorrow to pay for our tax cuts today," said Rep. Charles Rangel (search) of New York, the top Democratic tax writer. "So all we are saying is, don't take credit for extending tax cuts on the one hand while you're breaking your promise to balance the budget with the other."
Rep. Clay Shaw, R-Fla., said that clause would take authority for tax matters out of lawmakers' hands.
"A balanced budget is a good thing, but delegating legislative authority to unelected officials ... is a huge mistake," he said.
The Democratic version also would have adjusted tax laws to prevent the alternative minimum tax (search) from wiping out the tax cut. The alternative minimum tax was invented to stop wealthy individuals from sheltering their income from taxes but creeps further into the middle class each year.