The tax cut creates a new, retroactive 10 percent income-tax rate for all taxpayers on the first $6,000 of an individual's income and the first $12,000 for married couples. Other tax rates, except for the 15 percent rate, will drop by 1 percentage point starting July 1. Sometime this summer, taxpayers will get refunds to reflect some of those adjustments. Single taxpayers will get a $300 refund, single parents will get $500, and married couples will get $600.
Over time, the legislation further reduces income tax brackets, makes special adjustments for married couples, phases out the tax paid by heirs of large estates, and doubles the child tax credit for families with children.
"The government will now ease its grip on your wallet," said Sen. Charles E. Grassley (R., Iowa), who helped broker the tax cut as chairman of the Senate Finance Committee.
House and Senate negotiators came up with a package of tax cuts totaling $1.35 trillion over 10 years. Initially, the tax cut was spread over 11 years, but tax writers packed more cuts into the package by making them expire in 2010. That allowed them to meet 10-year congressional budget requirements by claiming no loss of revenue in 2011.
That accounting move drew loud protests from Democrats, who argued it was simply a gimmick. Lawmakers conceded that it would be nearly impossible politically to restore current tax rates 10 years from now. If the tax cuts continue into 2011, as Bush and Congress had originally intended, the cost of the package would be about $1.7 trillion, analysts said yesterday.
"This is good short-term politics; it is disastrous long-term policy," said Senate Minority Leader Tom Daschle (D., S.D.), who will shortly become majority leader.
The congressional vote was a bittersweet achievement for Republicans, who lost their control of the Senate last week when James M. Jeffords of Vermont abandoned the party to become an independent.
