NEW YORK (CNN/Money) -
It ain't over till it's over. But we're getting closer.
The House and the Senate have each passed tax bills that draw on key elements of President Bush's tax plan proposed early this year. But their bills differ in size and scope, and neither goes as far as the White House originally would have liked, particularly when it comes to eliminating the dividend tax for individuals.
There are tough debates ahead for the two legislative bodies to put together a unified package that the President will be willing to sign into law. One of the biggest hurdles will be to decide just how big the package should be -- the House bill calls for $550 billion in tax cuts, while the Senate bill proposes only $350 billion.
Were the House plan to pass into law as is, the Tax Policy Center, run by the Urban Institute and the Brookings Institution, estimates that taxpayers with adjusted gross incomes between $50,000 and $75,000 might save an average of $705 in federal taxes in 2003, and $684 in 2004.
Were the Senate plan to pass into law as is, the Center estimates savings of $688 in 2003 and $696 in 2004.
Here's a summary of what each bill offers individual taxpayers in four key areas.
Dividend tax cut
Currently, dividends are taxed at ordinary income tax rates and most long-term capital gains are taxed at 20 percent.
The House plan: Unifies and reduces the tax rate on dividends and capital gains to a flat 15 percent for most taxpayers and to 5 percent for taxpayers in the 10 percent and 15 percent tax brackets.
The Senate plan: Eliminates the dividend tax on investors in two steps, but the tax would be fully restored by 2007. In 2003, 50 percent of dividend earnings would be tax-free, then 100 percent would be tax-free from 2004 through 2006.
Rate relief
Currently, income tax rates are scheduled to be reduced in 2004 and again in 2006.
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The House plan: Accelerates the 2006 individual rate cut schedule to this year. (Top rates would be reduced from 28 percent to 25 percent; from 31 percent to 28 percent; from 36 percent to 33 percent; and from 38.6 percent to 35 percent.) Plus, the House plan expands the 10 percent tax bracket to include the first $7,000 of income for single filers and the first $14,000 of income for joint filers for 2003 through 2005.
The Senate plan: Same.
Marriage penalty relief
Currently, the "marriage penalty" is set to be reduced gradually until 2009, at which point it will be completely eliminated. At that time, married couples filing jointly will be entitled to take a standard deduction equal to twice that of single filers. And the amount of income taxed at 15 percent for married couples would increase to twice the amount of income taxed at 15 percent for single filers.
The House plan: Eliminates the marriage penalty from 2003 through 2005 by expanding the 15 percent bracket and increasing the standard deduction for joint filers to 2009 levels.
The Senate plan: Reduces the marriage penalty in 2003 by allowing married couples to claim 195 percent of the standard deduction to which single filers are entitled, and by expanding the level of income in the 15 percent bracket to 195 percent that of single filers. The marriage penalty is then eliminated completely in 2004, but then reinstated in 2005 to levels dictated by current law.
Child credit
Currently, parents receive a $600 tax credit for a child if the parents' adjusted gross income is $110,000 or less for joint filers or $75,000 for single filers. It's slated to increase gradually to $1,000 by 2010. In addition, parents who don't pay income tax are entitled to a portion of the child credit as a refund. That portion cannot exceed 10 percent of earned income in excess of $10,000. By 2005, that refundable percentage increases to 15 percent.
The House plan: Increases child credit to $1,000 from 2003 through 2005.
The Senate plan: Increases child credit to $1,000 through 2009, and increases the refundability rate to 15 percent this year.
-- CNN and Reuters contributed to this report
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