CHN: Tax Cut Reconciliation Bill Passes – More Tax Cuts to Come
Last week the five-year $70 billion tax cut reconciliation bill sailed to passage in the House and Senate, despite the unrefuted analysis that the bill overwhelmingly benefits the very wealthiest. (See the May 5 HNR.) The Senate, where only a simple majority was needed for passage, adopted the bill by a vote of 54-44. It passed the House 244-185. In both cases the votes were mostly along party lines with the majority of Republicans voting ‘for’ and Democrats ‘against.’
The two most costly provisions in the bill would extend the maximum 15 percent rate on the capital gains and dividends for two years through 2010, and would extend through 2006 changes in the Alternative Minimum Tax (AMT) designed to limit its impact on middle-income taxpayers. The bill has other provisions including ones favorable to small businesses and corporations.
In order to pass the Senate by a simple majority the cost of the tax reconciliation bill could not exceed $70 billion over five years. Because House negotiators insisted on including extending the capital gains and dividends provision for two years, there was not room to include extensions of other popular expiring tax breaks for individuals and businesses. A second bill – including extending the research and development credit, the work opportunity tax credit, and welfare to work credit and potentially extending the AMT through 2007 – is now being negotiated.
This bill could proceed as a free standing bill or be combined into a single package with the stalled pension reform bill. The pension reform bill raises revenue by increasing insurance premiums paid by corporations to the federal government’s Pension Benefits Guarantee Corporation. In either case, unlike the tax reconciliation bill, it will be open to amendments in the Senate and may require 60 votes for passage. Senate leaders have indicated that they would like to see the second bill passed before the Memorial Day recess.