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Senate passes tax cut
Vice President Cheney casts tie-breaking vote; $350 billion tax cut bill now goes to Bush.
May 23, 2003: 12:33 PM EDT

NEW YORK (CNN/Money) - The Senate passed a $350 billion tax cut bill Friday, following a similar House vote, meaning the bill will now go to President Bush, who has pledged to sign it into law.

The bill passed 51-50, including the tie-breaking vote of Vice President Dick Cheney. It temporarily cuts some individual taxes on dividends, lowers marginal tax rates, expands the child tax credit and gives $20 billion in aid to states.

President Bush is likely to sign the bill soon, probably next week. Though it is significantly less than the $726 billion in tax cuts he first sought or the original $550 billion House plan, passage by Congress is still a significant victory for the president.

The president has said the tax cuts would boost the economy and create jobs but Democrats have criticized it as a giveaway to the rich. The bill includes some of the controversial dividend tax cuts the president had initially sought.

In order to keep the total price tag low, many of the provisions in the plan are scheduled to "sunset," or expire in later years. But many analysts say Republicans will fight to keep those tax cuts in place, meaning the total cost of the tax cuts could climb by hundreds of billions of dollars.

Most provisions, including those cutting marginal tax rates and extending the amount of income taxed at the lowest rate, 10 percent, will take effect on July 1, and people with children will soon get rebate checks of up to $400 per child. (For more on the details of the plan and what it means to you, click here).

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CNNfn's Louise Schiavone reports on the $350 billion tax cut compromise reached by the House and Senate.

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Democrats who opposed the president's plan said most of its benefits went to wealthy Americans, it provided little short-term economic stimulus and would lead to soaring budget deficits.

Though many economists agreed with these objections, many also believe the economy will get a small boost from the tax cut, adding about half a percentage point to economic growth in 2003.

The economy grew at a 1.6 percent rate in the second quarter and is expected to grow only about 2.5 percent for the year -- far lower than the 3.5 percent growth some economists think is necessary to create jobs.

With the unemployment rate at 6 percent, and a half-million jobs lost so far this year, the President has said tax cuts will create jobs by encouraging business investment and consumer spending. Still, the total number of jobs the White House says will be created -- about 700,000 over four years -- is relatively small.  Top of page

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