Tax reduction for dividends
Senate Approves Legislation Cutting Taxes by $70 Billion
By THE ASSOCIATED PRESS
The central feature of the tax bill, left over from last year's agenda, holds back the alternative minimum tax, which threatens millions of families with higher taxes this year unless lawmakers stop its growth.
Originally intended to prevent the wealthy from erasing their tax liabilities through deductions and credits, the alternative minimum tax encroaches further on the middle class each year. Inflation and recently passed tax cuts have fueled its growth.
The bill passed, 66-31.
The House version of the bill carries a Republican priority, a two-year extension of the Bush administration's tax cuts on investment income. Though not scheduled to expire until the end of 2008, many Republicans want to act now to give the tax breaks a longer life.
Republicans expect the final version of the bill to extend tax cuts for capital gains and dividends. It will be up to negotiators to determine how to use their instructions to cut taxes by as much as $70 billion over five years to deal with the growing alternative minimum tax and expiring tax breaks for investors.
Senate tax writers used the bill to revive a business credit for research and development and keep it in place for two years. President Bush urged lawmakers to make the research incentive permanent during his State of the Union address.
Much of the Senate bill extends tax breaks popular with taxpayers, and therefore popular with their elected leaders. They include deductions for college tuition and teachers' expenses, as well as a credit for low-income savers.
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