Senate Passes $1.35 Trillion Tax-Cut Plan

WASHINGTON – The Senate on Wednesday passed an 11-year, $1.35 trillion tax cut offered by President Bush, who may be able to sign the bill by the end of the week.

Twelve Senate Democrats joined all 50 Republicans in backing the measure, easily passing it by a 62-38 tally. The bill was sent on to a joint House-Senate committee, where differences between the two bills will be worked out before it goes on for Bush's signature.

Both the House and Senate bills contain the core of Bush's original 10-year, $1.6 trillion tax cut: across-the-board income tax reductions, relief from the marriage penalty on many two-income couples, doubling of the $500 child tax credit and gradual repeal of the estate tax. Bush had made the tax plan one of the core issues of the presidential campaign, and promised swift action on it when he took office.

The tax cut was the largest since President Reagan's in 1981, and has been hailed by supporters as a vital boost to both deserving taxpayers and an unsteady economy.

"We're going to be able to get it done in the time frame" of Memorial Day, predicted the House Ways and Means Committee chairman, Rep. Bill Thomas, R-Calif.

Further complicating the debate was Jeffords' apparent decision to leave the GOP. But several senators said they believed a House-Senate conference would finish the tax bill before any shift in Senate balance of power. Each party has 50 seats in the Senate.

"I don't think there's much of a cloud over this tax bill," said Sen. Max Baucus of Montana, ranking Democrat on the Finance Committee and chief co-sponsor of the legislation.

They differ in how quickly the tax cuts are phased in, mainly because the Senate bill had to offset the costs of including tax breaks for education, such as a $5,000 college tuition deduction, and provisions for lower-income people, such as allowing them to claim a portion of the child credit for the first time.

The Senate also carves out a new 10 percent tax bracket for the first portion of every taxpayer's income, retroactive to Jan. 1, while the House creates an immediate 12 percent rate that eventually drops to 10 percent.

It appeared increasingly likely that the final compromise would be closer to the Senate version, simply because of the need to appeal to moderate Democrats and Republicans who hold the key to passage.

One Republican source, speaking on condition of anonymity, said House GOP leaders were "coming to grips" with the idea that fundamental changes would put the compromise bill in serious jeopardy when it goes back to the Senate for final passage.

The main author of the Senate bill, Sen. Charles Grassley, R-Iowa, the Finance Committee chairman, said House leaders have indicated to him that they were "receptive to more components" in the Senate measure with the knowledge that it was written to pass in a Senate divided between 50 Democrats and 50 Republicans.

"We're well on our way to having a bipartisan bill," Grassley said.

Democrats forced vote after vote Tuesday to underscore their unhappiness with the bill, which they say was tilted too much toward the wealthy and would consume surplus dollars that could be better used for priorities such as education, debt reduction and Medicare prescription drugs.

"The alternative is just waving a white flag," said Sen. Charles Schumer, D-N.Y.

Some Republicans insisted the delaying tactics would only serve to remind Americans that they are the party pushing hardest for tax cuts.

Republicans argued those efforts only made the bill more popular with taxpayers.

"The longer we have the Democrats dragging it out, the better for us," said Sen. Sam Brownback, R-Kan.