CONGRESS House bill makes tax cuts permanent

Democrats say the budget must be balanced along with preserving tax cuts.
WASHINGTON (AP) -- Reminding voters that President Bush's tax cuts have fattened their paychecks, the House wants to make permanent a new tax bracket that lowered taxes on the first $7,000 earned by workers.
It's the third in a series of bills that together are an election-year push to lock in some of Bush's most popular tax cuts. Democrats have used each bill as an opportunity to blast Republican stewardship of the economy and deepening deficits.
Vote expected today
The House expects to vote today on a bill making permanent the bottom tax bracket created in the 2001, which lowered taxes on the first $6,000 in wages from 15 percent to 10 percent. In 2003, Congress expanded the bracket to cover the first $7,000 earned.
Without action, the bracket shrinks back to $6,000 next year and disappears completely in 2011. Other popular tax cuts also disappear at the end of the decade, including tax cuts for married couples and a bigger child tax credit.
Rep. Pete Sessions, R-Texas, said the bill gives workers "more money, more take-home pay, more opportunity."
"It does the right thing for middle-class wage earners," he said.
Preserving the broadened bracket would cost $218 billion through 2014.
Democrats said they back the effort to preserve the bottom bracket, but not at the expense of a growing deficit.
They plan to offer an alternative tax cut that keeps the expanded bottom bracket through 2010. The tax cut would be covered by a 1.95 percent surcharge on individuals who earn $500,000 or more and couples who earn $1 million or more.
Balanced budget
After 2010, the bottom bracket stays in place only if Congress makes sure projections show the federal budget would be balanced by 2014.
"We don't want our grandkids to pay higher taxes tomorrow to pay for our tax cuts today," said Rep. Charles Rangel of New York, the top Democratic tax writer. "So all we are saying is, don't take credit for extending tax cuts on the one hand while you're breaking your promise to balance the budget with the other."
The Democratic version also adjusts tax laws to prevent the alternative minimum tax from wiping out the tax cut. The alternative minimum tax was invented to stop wealthy individuals from sheltering their income from taxes but creeps further into the middle class each year.
The House expects to act next week to prevent the $1,000 child tax credit from shrinking to $700 at the end of the year. Last month, the House dealt with the marriage penalty, making the tax cuts for married couples permanent.
Senate tax writers expect to consider a bill extending the expiring tax cuts later this year.