Congress agrees on tax cut framework

WASHINGTON -- House and Senate Republicans agreed on a framework for a $383 billion tax and spending package designed to give lift to an ailing economy.\nThe framework, worked out late Tuesday night, leans more toward the version passed by the House and cuts taxes on dividends and capital gains to 15 percent through 2009, for a total cost to the Treasury of $179 billion.\nThe newest proposal does not at any point eliminate taxes on dividends. The Senate had voted narrowly last week to suspend the taxes in 2004, 2005 and 2006.\nThe framework combines a total of $350 billion in tax cuts with $33 billion in spending. The spending includes $20 billion for state aid and roughly $12 billion in child credit refunds.\nThe combination exceeds a $350 billion limit that GOP moderates imposed in the Senate's version, and Republican aides cautioned that they may not have enough votes to pass the plan without backing from those moderates.\nRepublican George Voinovich of Ohio, who had been instrumental in capping the tax cut to curb growing deficits, said Wednesday he will not vote for a package that exceeds $350 billion. "The money for the states has got to be either within the 350 or it's paid for with offsets," he said. "That's what my understanding was, and that's where I'm at."\nThe tentative agreement includes the basic components that had been written into both the House and Senate bills. Some of the tax cuts expire in a few years, a device used to hold down the projected cost to the Treasury.\nThe plan reduces taxes on wages by accelerating planned cuts to income tax rates. It cuts taxes for married couples and gives parents a $1,000 child tax credit through 2005.\nThe proposal temporarily allows small businesses to write off up to $100,000 of new equipment investments.\nThe plan closely follows the outline drafted by the House. Sen. Max Baucus, D-Mont., said negotiators probably jettisoned most of the Senate's bill to please House leaders still upset that the Senate sliced President Bush's initial $726 billion stimulus proposal in half.\nThe committee chairman entered negotiations as Senate tax writers discovered they made a $70 billion error while calculating the cost of the dividend tax cut that is the centerpiece of Bush's plan to lift a stagnant economy.\nDemocrats said the dividend tax mistake showed that Republicans were working too hastily, under pressure to pass a tax cut before Memorial Day. "It shows this was done hastily and not thought through," Baucus said.\nThe error in the Senate's version of the bill will not be fixed quickly because Senate Democrats refused to give their consent, Grassley, the chairman of the Senate Finance Committee, said Tuesday. "It would have taken 60 seconds to make this correction, but they wouldn't give 60 seconds to save $70 billion," Grassley said.\nAnalysts traced the $70 billion error to language that suspended taxes on dividends based on accumulated earnings. Lawmakers had intended to make the policy apply only to dividends based on the current year's earnings, meaning the tax cut would have been smaller.