WASHINGTON – Senators argued Monday over the Bush administration's tax cuts for investors while sending a $70 billion tax bill into final negotiations.
Although the bill makes no mention of tax cuts for capital gains and dividends, Democrats lined up motions to attack the tax reductions and Republicans rushed to defend them.
The election-year debate proved a mostly political display. The motions under debate don't bind lawmakers who will hammer out the final version of the tax bill. They can only make suggestions to negotiators.
Sen.Trent Lott of Mississippi, a Republican member of the Senate Finance Committee, said he hoped to be chosen as one of those negotiators. "You think I'm going to pay attention to any motions to instruct me?" he asked. "Baloney."
The bill would cut taxes $70 billion over five years, mostly extending tax breaks scheduled to expire before the end of the decade.
The centerpiece of the House bill would preserve tax cuts for capital gains and dividends for two years after their scheduled disappearance at the end of 2008. The biggest feature of the Senate bill would prevent millions of families from owing the alternative minimum tax this year.
Democrats urged negotiators to make their priority the alternative minimum tax, intended to trap wealthy tax dodgers but now encroaching on the middle class. They also said money returned to taxpayers through the capital gain and dividend tax reductions would be better spent on veterans, military equipment, health care and other needs.
"If we are honest about reducing the deficit and strengthening the economy, we need to stop lavishing tax breaks on the rich and start investing in the health and well-being of all families," said Sen. Edward Kennedy, D-Mass.
Republicans said taxpayers will be surprised to find their taxes increasing unless Congress acts to keep all tax reductions, including those for investors, in place.
"Sen. Kennedy repeats the old demagogic saw about capital gains and dividends being only tax benefits for the wealthy," said Senate Finance Committee Chairman Charles Grassley, R-Iowa. "I don't think we ought to be persecuting the few to punish the many."
Senators approved a nonbinding recommendation to increase spending on veteran and military health care, but rejected a Democratic effort to fund those increases by withholding some tax cuts for high-income taxpayers.