Vice President Dick Cheney was called into Senate chambers Thursday, where he cast the deciding vote on a hotly contested tax-cut package amendment that will suspend taxes on stock dividends for three years.
"It would encourage investment, it would encourage jobs, it would encourage growth," Sen. Don Nickles, R-Okla., said of the measure just before Cheney submitted the tie-breaking ballot in the 51-50 vote to eliminate dividend taxes in 2004, 2005 and 2006.
The $350 billion package includes an additional $90 billion in cuts and aid to states that will be offset with higher fees and other taxes.
Nickles' amendment was supposed to be a compromise over the dividend tax cut that has stalled debate on the measure.
Sen. Max Baucus, D-Mont., said the dividend break will come at the expense of married couples whose tax breaks were scaled back to make room in a tight budget. "Americans today who otherwise will receive the relief on the marriage penalty contained in this bill are going to be subsidizing and paying for, in effect, these tax-free dividends," he said.
President Bush had sought passage of a dividend tax cut as part of his economic stimulus package. Last week, the House passed a $550 billion tax cut plan that lowers the top income-tax rate on dividends from U.S. companies to 15 percent, down from its current high of 38.6 percent. The measure would last the life of the 10-year cut.
The Senate's $350 billion measure provides much less room for dividend tax cuts. On Tuesday, the Senate Finance Committee (search) approved a measure that would exclude from taxation the first $500 of dividend income, plus 10 percent of additional dividend income through 2007. The exclusion would increase to 20 percent of income between 2008-2012. The plan would cost $81 billion over 11 years.
