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December 8, 2005
Despite Deficit, House Approves $56 Billion in Tax Cuts
By EDMUND L. ANDREWS
WASHINGTON, Dec. 8 - The House of Representatives passed the last and biggest portion of $95 billion in tax cuts today, a move that reflected the willingness to place tax cuts above the risk of higher budget deficits in years to come.

Voting 234 to 197, almost purely along party lines, the House approved $56 billion in tax cuts over five years, just one day after it passed other tax cuts totaling $39 billion over five years. The biggest provision would extend President Bush's 2001 tax cut for stock dividends and capital gains for two years at a cost of $20 billion. All of the House's maverick Republican conservatives, who had criticized their party leaders two months ago for being too soft about spending cuts, voted enthusiastically for the tax cuts, which add up to nearly twice as much as the spending cuts passed last month.

"Clearly, tax relief is part of the deficit solution, not part of the problem," said Representative Jeb Hensarling, Republican of Texas and one of the mavericks.

"More economic growth and more jobs means more tax revenue flowing into the federal Treasury," he continued. "Tax revenues are up close to 15 percent, the highest level in U.S. history, and the budget deficit has shrunk by more than $100 billion."

That view is not shared by all. Alan Greenspan, the chairman of the Federal Reserve, urged lawmakers last month against approving any more tax cuts unless they cut spending by at least the same amount. The budget plan, which passed the House just before Thanksgiving, would cut about $51 billion over five years from programs like Medicaid, food stamps, farm subsidies and child-support enforcement programs aimed at deadbeat parents.

The Republican-controlled Senate passed a much more cautious tax package just before Thanksgiving. The Senate bill would cut taxes by about $60 billion over five years, and it would not extend Mr. Bush's tax cut on stock dividends.

The conflict between House and Senate bills is unlikely to be resolved before Congress adjourns for the Christmas holidays. As a result, taxpayers will face uncertainty about a long list of popular tax cuts that are set to expire at the end of 2005.

The biggest expiring tax cut is one that would prevent the alternative minimum tax from applying to millions of additional families with incomes above $100,000 a year.

Democrats accused the Republican majority of expanding tax cuts to the nation's very richest families while cutting programs to help the poor.

"The choice is clear - tax relief that goes to people making a million bucks or more, and cutting student loans, cutting food support for people who need it and cutting child support," said Representative Sander Levin, Democrat of Michigan.

But the Republican majority easily defeated an alternative plan proposed by Democrats, which would have trimmed many tax breaks for business and allowed the tax cut for stock dividends expire at the end of 2008.

"If you vote yes for the Democratic substitute, you are increasing taxes over five years by $40 billion," declared Representative Bill Thomas of California, the Republican chairman of the House Ways and Means Committee. "That is the single largest tax increase since they were in the majority in 1983."

Only three Republicans voted against the tax bill, all of them well-known centrists: Representative James Leach of Iowa, Representative John Boehlart of New York and Representative Fred Upton of Michigan.

Mr. Boehlart said that some of the tax cuts were warranted, but that the tax break for dividends and capital gains was ill-timed.

"I think the argument is pretty good that it is going to the top 1 percent of wage earners at a time when we are struggling to find money," Mr. Boehlart said today.



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