House, Senate agree on $1.35 trillion tax cut

Grassley called the compromise "a victory for bipartisanship" -- and taxpayers

WASHINGTON (CNN) -- The House of Representatives began debate shortly before 7 a.m. Saturday on a 10-year, $1.35 trillion tax cut, including a quick rebate for most taxpayers, after reaching a compromise with the Senate.

House and Senate negotiators agreed Friday evening on a 10-year, $1.35 trillion tax cut -- including a quick rebate for most taxpayers -- which is expected to pass both houses of Congress by the end of Saturday.

The House was expected to vote by midmorning, and the Senate session was due to begin at 10 a.m.

"The tax bill is a victory for Republicans. It's a victory for Democrats. It's a victory for the president, but most importantly, it's a victory for the taxpayers of the United States," said Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee.

Among other provisions, the measure would cut the top tax rate from 39.6 to 35 percent; eliminate the federal tax on large estates; cut the tax penalty faced by many married taxpayers filing joint returns; and give immediate rebates of $300 for single taxpayers and $600 for joint filers.

A $1.35 trillion deal The compromise tax cut worked out by House and Senate negotiators Friday evening would: • cut the top income tax rate from 39.6 to 35 percent • double the $500 child tax credit • eliminate the federal tax on large estates • provide marriage penalty tax relief • give $300 rebates for single taxpayers and $600 for joint filers • raise contribution limits for IRAs from $2,000 to $5,000 • raise contribution limits for 401(k) plans from $10,500 to $15,000.   INTERACTIVE Highlights of Bush's 2002 proposed budget     FYI What is Bush's budget plan? A discussion guide for parents, educators     RESOURCE Comparing House, Senate tax-cut plans     MESSAGE BOARD Taxing and spending: Bush budget

Except for the tax rebates, the other tax reductions will be implemented gradually over a 10-year period.

"Is it a perfect agreement? Of course not. But does it help people who need the help the most at the bottom end of the economic ladder? I think it does," said Sen. John Breaux, D-Louisiana. "Does it also help people at the top end who pay the greatest amount of taxes? The answer is also yes."

The White House is already making plans for President Bush to sign the final bill into law.

"I think we're probably looking at the week of June 5th," White House Chief of Staff Andrew Card said. "He'll probably want to sign it when Congress is back in Washington."

The rebate checks are part of a $100 billion "stimulus" package, designed to provide immediate help for the economy. California Republican Bill Thomas, chairman of the House Ways and Means Committee, said the compromise will provide about $30 billion in tax relief this year.

While the White House wanted the money to be refunded directly, some congressional leaders preferred changing tax withholding tables to put more money in taxpayers' paychecks over time.

House-Senate conference committees from have been working late into the night for the past three days to meet Bush's request that Congress pass tax relief by Memorial Day.

The House and Senate had passed different versions of the tax cut, the centerpiece of Bush's legislative agenda. The House version of the tax cut was largely what Bush proposed: a $1.6 trillion cut that reduces the top tax rate from 39.6 to 33 percent. The Senate reduced the overall tax cut to $1.35 trillion and kept the highest tax bracket at 36 percent.

Conservative Republicans in the House had hoped to use the conference process to push for deeper tax cuts. But Grassley had warned that any package going much beyond the bipartisan compromise crafted in the Senate may not have enough support to pass.

Another sticking point was the issue of a refundable child tax credit, which the Senate passed but the House did not. Thirteen Senate moderates, led by Sen. Olympia Snowe, R-Maine, signed a letter saying they would not support a bill that does not include at least a partially refundable child tax credit -- something conservatives, including Thomas, opposed.

The refundable credits would allow people who do not owe any income tax to get the credit as a refund.