WASHINGTON — The Republican-controlled House voted Thursday to approve a multipurpose measure that would extend one of President Bush's cherished tax reductions, setting up a showdown with the Senate.
The $56-billion measure was approved a day after the House passed three other tax bills that together would cost the government $94 billion over five years. Last month, the Senate passed a single $58-billion tax-cut bill. House and Senate negotiators will now try to reconcile their differences, but they are not expected to finish until early next year, if at all.
Perhaps the knottiest issue will be whether to extend the 15% maximum tax rates on capital gains and dividends. Current law calls for rates to rise at the end of 2008 to maximums of 20% for capital gains and 35% for dividends. The House bill approved Thursday would extend the 15% rates through 2010; the Senate bill includes no extension.
The differences in the two chambers' bills underscore the divisions within the ranks of the Republicans, who outnumber Democrats in both the House and Senate.
Negotiations over a compromise tax bill will come as House and Senate Republicans face an equally tough task trying to agree on spending cuts. Both chambers have approved spending-cut bills that include other controversial items -- notably a Senate-backed proposal to open Alaska's Arctic National Wildlife Refuge to oil drilling.
Thursday's bill passed the House on a largely party-line vote of 234 to 197, with all but three Republicans voting for the measure and nine Democrats breaking ranks to vote for it. California House members split along party lines.
Republicans argued that a vote against the measure would be a vote to raise taxes. They also maintained that continuing the low rates on dividends and capital gains, a centerpiece of Bush's 2003 tax cuts, was necessary to provide certainty for investors and businesses and sustain economic growth.
"Tax cuts have, indeed, done what the president said they would do," Rep. Jim McCrery (R-La.) said at a Capitol news conference.
Democrats assailed the tax cuts for aggravating already large budget deficits. The House-passed spending-cut bill would save $50 billion over five years, $44 billion short of the lost tax revenue. House Democratic Leader Nancy Pelosi of San Francisco said it was "immoral of us to heap these deficits on our children."
