US Congress passes more tax cuts for the rich

The legislation, which passed the Senate on Thursday and the House of Representatives on Wednesday, will extend cuts on capital gains and dividend taxes, almost exclusively benefiting the wealthy. Another measure will remove restrictions on the ability of high-income Americans to put their money in a certain type of retirement account that does not tax investment gains or withdrawals. A third measure would extend exemptions on the Alternative Minimum Tax (AMT).

Due to special Senate rules, the bill, since its estimated cost was not more than $70 billion, could be passed with a simple majority and could not be filibustered in the Senate. In both houses, it passed without much debate, in votes split largely along party lines.

The top priority of the Bush administration in getting the bill passed was the extension of cuts in capital gains and dividend taxes. The tax rate for these types of investment income is currently set at 15 percent, as a result of legislation passed in 2003. Before then, these gains were taxed as regular income, meaning that top income earners paid 38.6 percent. The reduced rate was set to expire in 2008, since the tax cuts were originally promoted as a temporary measure needed to stimulate the economy. Like the variety of other tax cuts for the rich, however, the measure’s backers never intended for it to actually expire. The new bill will push the date of expiration back to 2010.

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