Congress passes tax bill in time for holiday

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

WASHINGTON (CNN) -- The U.S. Senate followed the House on Saturday, approving a tax bill that will provide $1.35 trillion in tax cuts over the next 10 years - and should result in most tax payers receiving a rebate this year.

Fifty-eight senators -- including James Jeffords, the Vermont Republican who announced this week he was changing his affiliation to independent -- voted in favor of the bill, as did 240 representatives.

Jeffords' defection gives the Democrats a one-vote majority in what had been an evenly split Senate.

A House-Senate conference committee reconciled differing versions of the tax bill -- the centerpiece of President George W. Bush's legislative agenda -- Friday night, setting the stage both house's to pass the measure by Memorial Day.

Bush was expected to make a statement praising the bill's passage Saturday afternoon, but he did not plan to sign the bill until after Congress returns from the holiday on June 5.

Before the vote, Bush said in a statement that the House-Senate agreement would give "American taxpayers ... more money their pockets to save and invest and economy will receive a well-deserved shot in the arm."

Sen. Trent Lott, the Mississippi Republican who will lose his post as majority leader after the Memorial Day break, predicted that the Senate would continue to back Bush's agenda even after the Democrats take charge.

A $1.35 trillion deal The compromise tax cut worked out by House and Senate: • cuts the top income tax rate from 39.6 to 35 percent • doubles the $500 child tax credit • eliminates the federal tax on large estates • provides marriage penalty tax relief • gives $300 rebates for single taxpayers and $600 for joint filers • raises contribution limits for IRAs from $2,000 to $5,000 • raises contribution limits for 401(k) plans from $10,500 to $15,000.  VIDEO The U.S House of Representatives pass the compromise tax bill, 240-154. Play video (QuickTime, Real or Windows Media)     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

"We held the line and we got this job done and I'm very proud that the Senate has acted in this way," Lott said. "And let me say this too: No matter who the personalities may be in various and sundry positions, we can do this again and again."

"Today the message to the taxpayers is this: Substantial tax relief is on the way," said Sen. Charles Grassley of Iowa, Republican chairman of the Senate Finance Committee. "The government will ease its grip on your wallet."

But South Sen. Tom Daschle, the Democrat who will take Lott's place as majority leader, called the budget process "confrontational" and said Democrats had been "locked out" during the conference committee meetings that reconciled the House and Senate versions of the bill.

McCain, Chaffee join Democrats

The final version of the bill will provide quick rebates to most taxpayers and phase in other cuts over the next decade. Twenty-eight Democrats and one Independent joined the 211 Republicans who approved the bill in the House vote. One Independent and 153 Democrats voted against it.

On the Senate side, 12 Democrats voted with 45 Republicans and Jeffords to pass the bill. Republican Sens. John McCain of Arizona and Lincoln Chaffee of Rhode Island joined the 31 Democrats in opposition.

Several Democrats argued that the bill was irresponsible and shortsighted, but Sen. Max Baucus, D-Montana -- who represented Democrats in the conference committee meetings along with Sen. John Breaux of Louisiana -- said before the votes that "Democrats fully participated in this process."

"I do believe this is a very good result," he said.

Among other provisions, the measure would 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 filing joint returns; and give immediate of $300 for single taxpayers and $600 for filers.

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.