WASHINGTON -- The U.S. Senate on Wednesday passed a sweeping $1.35 trillion tax cut as Republican leaders rushed to land President Bush's top priority on his desk before a possible shift in power in the Senate.
The Senate modified Bush's original tax cut proposal and the bill now has to go to a conference between the Senate and the House of Representatives, which has approved its own version along the lines of Bush's original $1.6 trillion plan.
Lawmakers said the conference could act swiftly to produce a final version of the bill that could land on Bush's desk for his signature before Democrats take control of the Senate after a possible Republican defection.
"I don't think there is much of a cloud on the tax bill," said Sen. Max Baucus of Montana, the top Democrat on the tax-writing Senate Finance Committee.
The fate of the tax bill was thrown into question on Wednesday by the possible defection of Sen. James Jeffords of Vermont from the Republican party. The move would shift Senate control from Republicans to the Democrats. Jeffords, who had been critical of Bush's original $1.6 trillion tax cut, said he will announce his plans on Thursday. Jeffords voted for the Senate compromise package.
The Senate bill calls for lowering the top 39.6 percent tax rate to 36 percent and creates a new 10 percent bracket at the lower end of the current 15 percent income bracket retroactive to the start of the year. The House tax cut and Bush's original proposal called for a top rate of 33 percent, which moderates said was too big of a cut at the top end.
The bill also gradually repeals estate taxes by 2011, raises the child tax credit and makes it partially refundable. It provides new tax breaks for education and allows bigger contributions to retirement savings account. It also eases the marriage tax penalty for working couples.
DEMOCRATS SEE BIG MISTAKE
Many Democrats are highly critical of the tax cut, arguing it is too big and mostly benefits the wealthiest taxpayers. They also argue that the cost of the 11-year package would explode by 2011 just as the baby boom generation is preparing to retire and draw on their Social Security retirement benefits and Medicare health care benefits.
"I believe with all my heart we will regret the day that this passes and is sent to the president for his signature," Senate Democratic Leader Tom Daschle of South Dakota said.
"I think we will regret it in part because it is based on projections that are very faulty. We will not realize a $5.7 trillion (over ten years) surplus," he added.
Republicans said they expect the House-Senate conference to act quickly on the bill, but Baucus said much depends on whether the Senate gets its way in conference. Once the conference completes a final version of the bill, it goes back to both chambers for final passage. It will then be sent to the White House for Bush's signature.
"It's a steep uphill climb," said Baucus who would be in line to take over chairmanship of the Finance Committee under Democratic control of the Senate.
Whether the bill is completed this week before lawmakers break for next week's Memorial Day holiday "depends on what they (House conferees) agree to," Baucus said.
A group of Senate moderate Republicans and Democrats, who hold the crucial swing votes in the evenly-divided Senate, said the final version must reflect the Senate compromise.
Fifteen moderates signed a letter to Grassley saying their support for the final version of the tax cut depended on conferees sticking closely to the Senate version.
"We believe adhering as closely as possible to the Senate-passed bill is necessary in order to pass a conference report in the Senate," the Senators wrote.
