House passes investor tax cuts
Published 9:00 pm Thursday, December 8, 2005
WASHINGTON – The House approved a $56 billion tax cut Thursday that would keep alive the deep reductions in the tax rates on dividends and capital gains passed in 2003. But the measure is certain to be challenged by senators, who have so far balked at the investor tax cuts.
The bill passed largely along party lines, 234 to 197, after a rancorous partisan debate over whether the tax cuts would chiefly benefit the rich or sustain economic growth. Nine Democrats joined 225 Republicans for passage, while three Republicans – Sherwood Boehlert of New York, Jim Leach of Iowa and Fred Upton of Michigan – sided with 193 Democrats and independent Bernie Sanders of Vermont to oppose it.
The tax measure’s cost would more than offset the savings in a tough budget approved by the House in November, which trims federal spending by $50 billion over five years by imposing new fees on Medicaid recipients, squeezing student lenders, cutting federal child support enforcement and paring food stamp rolls.
Democrats charged that those cuts, largely affecting programs for the poor, were making way for tax cuts mainly for the rich that would still widen the federal budget deficit.
“The poor suffer, the rich benefit. The middle class is paying the bill,” said House Minority Leader Nancy Pelosi, D-Calif.
Republicans countered that allowing the tax cuts to expire would choke off the economic expansion and harm the poor far more than modest changes to federal programs.
In unusually personal terms, Rep. David Dreier, R-Calif., dismissed the Democrats’ “pathetic arguments” as “nothing but the ideological baggage of the past.”
The nine Democrats who voted for the bill were John Barrow and Jim Marshall of Georgia, Melissa Bean of Illinois, Dan Boren of Oklahoma, Robert Cramer of Alabama, Henry Cuellar of Texas, Lincoln Davis and Bart Gordon of Tennessee and Mike McIntyre of North Carolina.
Passage of the tax package marked the fourth tax cut approved by the House in two days, cuts that total $94.5 billion over five years. But Thursday’s cut was the largest and most widely debated. The measure extends a bevy of tax breaks for a single year, including incentives to employ American Indians and welfare recipients, establish tax-free medical savings accounts, extract oil and gas from old, marginal wells and invest in the District of Columbia.
The bill also extends for one year a federal tax deduction for local sales taxes and for some college tuition costs. It extends through 2009 an earlier tax break that allows small businesses to write off much of the value of investments, at a five-year cost to the Treasury of $7.3 billion.
But the centerpieces of the bill are the extensions through 2010 of the capital gains and dividend tax cuts, which lowered the tax rate on investment income to 15 percent from as high as 38.5 percent. Those measures alone are estimated to cost $20.6 billion over five years and $50.8 billion over 10 years.
