WASHINGTON -- President Bush signed a bill on Wednesday that offers $330 billion in tax breaks to families, businesses and investors and $20 billion in state aid - a package less than half the size of the one he initially sought.
The 10-year legislation, which Bush signed with considerable fanfare at a White House ceremony, will within weeks start speeding refunds to parents and fattening paychecks and investor earnings.
The Internal Revenue Service is posting new withholding tax tables so employers can start leaving more money in workers' paychecks starting next month; child tax credits checks of up to $400 per child will begin arriving in the mailboxes of 25 million eligible families in July, the president noted.
"By ensuring that Americans have more to spend, to save and to invest, this legislation is adding fuel to an economic recovery," Bush said. "We have taken aggressive action to strengthen the foundation of our economy so that every American who wants to work will be able to find a job."
The bill-signing in the East Room was for the third-largest tax cut in the nation's history. It came a day after Bush - with no comment or ceremony - signed a bill allowing the federal government to borrow as much as $7.4 trillion.
The $984 billion increase in the federal debt limit, which the White House announced in a 20-word statement from the press secretary, is the largest on record. It will help pay for the new tax cuts that the GOP-run Congress passed on close votes at Bush's behest.
Bush said the legislation will provide tax relief to 136 million American taxpayers.
"We are helping workers who need more take-home pay," Bush said. "We are helping seniors who relay on dividends. We are helping small business owners looking to grow and create more jobs. We are helping families with children who will receive immediate relief."
Democrats have sought to draw attention to the federal IOUs that have resumed piling up under Bush, and which are projected to balloon further with the new tax cuts.
After running annual surpluses during the last four years of the Clinton administration, huge federal deficits have returned with no end in sight. This year's is expected to exceed $300 billion - a record in dollars, albeit not as a percentage of the national economy.
Senate Majority Leader Bill Frist countered that spending the money now will create a healthy economy that will help the nation eliminate shortfalls later on.
"I don't like the fact that we are having to borrow money today," Frist, R-Tenn., said on PBS' "The NewsHour With Jim Lehrer." "But ... by giving individuals more money to spend and also creating more jobs in the economy, we will be able to grow that economy, which over time will make that deficit disappear."
Democrats also have criticized the package as a giveaway to the wealthy, stressing its cuts on taxes on capital gains and corporate dividends rather than its lower income tax rates and increases in the federal child credit. Frist dismissed that emphasis as "the old, worn-out, tired, class warfare issue."
As Bush traveled widely to sell his package, he portrayed the ailing economy as something he inherited, taking care to mention that the recession took place in 2001's first three quarters - the beginning of his presidency. That period of negative growth was then exacerbated by that fall's terrorist attacks and corporate corruption scandals, he often said.
The intent was to place the problems' creation outside the president's control, while positioning him to gain credit for trying to fix them.
But after a $1.35 trillion tax cut in 2001, a $96 billion stimulus last fall and the new $350 billion package, it is widely agreed that Bush now has ownership of the economy for better or for worse.
Democrats hope the economy will help them score politically. They repeatedly highlight the job losses over Bush's term - 2.7 million private sector jobs. White House press secretary Ari Fleischer said Tuesday the new measure would create "more than one million jobs," but even that figure would amount to a net loss without other developments.
The bill accelerates several income tax cuts previously scheduled to take effect later in the decade, including rate cuts and the federal child credit; lowers taxes on many married couples; eases levies on investors; and allows bigger write-offs for small businesses.
Bush first forwarded his tax-cutting blueprint in January - a $726 billion tax cut that exposed divisions among Republicans and drew skepticism from Federal Reserve Chairman Alan Greenspan.
The GOP-controlled Congress then scaled it back, with the House setting a $550 billion maximum and the Senate backing no more than $350 billion.
Highlights of the $350 billion stimulus package President Bush signs into law on Wednesday:
-Accelerates several income tax cuts previously scheduled to take effect later in the decade. Highest income tax brackets reduced, reaching back to Jan. 1, from 38.6 percent to 35 percent, from 35 percent to 33 percent, from 30 percent to 28 percent and from 27 percent to 25 percent. The lowest, 10 percent bracket expands in 2003 and 2004. Many of the personal tax reductions expire in 2005, others in later years.
-The child credit increases to $1,000 per child from the current $600, in 2003 and 2004, with many parents getting an advance refund of up to $400 per child later this summer.
-Married couples who pay higher taxes than they would if filing as two single taxpayers will see some of that "marriage penalty" disappear, as the 15 percent bracket would be expanded and their standard deduction increased in 2004 and 2005.
-Prevents more taxpayers from paying alternative minimum tax in 2003 and 2004.
-Doesn't entirely eliminate taxes on corporate dividends as Bush demanded, but investors will see the tax rates on their earnings drop as the top rates on dividends and capital gains fall to 15 percent. Lower income earners will pay a 5 percent rate on both. The new rates will run through 2007; in 2008, the lower rate will drop to zero. In 2009, taxes on dividends return to rates paid on ordinary income, taxes on capital gains return to a top rate of 20 percent.
-Small businesses will be able to immediately write off $100,000 in new equipment purchases and all businesses will be able to expense half their investments this year.
-$20 billion in aid for cash-strapped states.
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Examples of tax savings for taxpayers with various wage and investment incomes.
-Single parent with one child, $400
-Married couple with two children, $955
-Single parent with one child, $400
-Married couple with two children, $1,133
-Single parent with one child, $877
-Married couple with two children, $2,021
$50,000 income ($5,000 dividends, $10,000 capital gains)
-Married couple, $1,333
$100,000 income ($7,500 dividends, $15,000 capital gains)
-Married couple, $3,393
$150,000 income ($10,000 dividends, $20,000 capital gains)
-Married couple, $4,832
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Source: H&R Block
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