$1.35 trillion tax cut becomes law
WASHINGTON (CNN) -- President George W. Bush signed into law Thursday the first major piece of legislation of his presidency, a $1.35 trillion tax cut over 10 years.
The White House ceremony was attended by members of Congress who backed the bill.
"Across-the-board tax relief does not happen very much in Washington, D.C., in fact it has happened only twice: President Kennedy's tax cut in the '60s and President Reagan's tax cut in the '80s," Bush said. "And now it's happened for a third time. And it's about time."
Following the signing, House Minority Leader Richard Gephardt, D-Missouri, joined House Minority Whip David Bonior, D-Michigan, and other congressional opponents of the tax cut at a Capitol Hill news conference.
"Democrats want tax relief that goes to every taxpayer," Gephardt said. "This bill does not do that." The minority leader said the middle class will not benefit enough from the tax cut and the wealthy will reap unfairly high benefits.
New Senate Majority Leader Tom Daschle, D-South Dakota, has said Congress will eventually be forced to revisit the tax cut, which he argues is too large, too generous to the rich and too expensive.
"I just know that at some point that reality is going to come crashing down on all of us and we're going to have to deal with it," Daschle said Wednesday.
On Saturday, just hours after the measure passed both houses of Congress, Bush rushed back to the White House from his Camp David retreat to hail the measure as "historic" and the "responsible thing to do for the American people and the economy."
The law, the first major tax cut in 20 years, cuts income tax rates across the board, reducing the lowest rate from 15 percent to 10 percent, and the highest rate from 39.6 percent to 35 percent.
Some of the law's provisions are delayed several years, but eventually the measure will double the child tax credit from $500 to $1,000, reduce the tax penalty on married couples and fully repeal the tax on estates.
Once all cuts are fully phased in, the average family of four making $50,000 will save $1,825 per year, according to a Senate Finance Committee staff estimate.
The Treasury Department says 38 million families with children will save an average $1,460, 43 million married couples will save an average of $1,728, and 11 million single mothers will save an average of $772, once all cuts are phased in, a process that will take up to 10 years.
One provision of the law -- the cut of the lowest tax rate to 10 percent -- was made retroactive to January 1, 2001, and taxpayers will be sent a rebate to cover that cutback.
Ninety-five million refund checks will start going out in the mail July 20, said Michele Davis, Treasury Department spokesman. The checks will be sent to anyone who filed a tax return this year. Singles will get $300, single parents will receive $500 and married couples will see a $600 rebate.
The first week, checks will go to people whose Social Security numbers' last two digits are in the range of 00 to 09, Davis said, and each following week people whose Social Security numbers end in the next 10 numbers will be sent checks.
The president said the refunds will give a boost to the economy, but economists have said that depends on how much consumers decide to spend.
"To the extent that consumers end up either using the majority of [the refund] to pay down debt or simply to save for a rainy day, obviously the economic impact is going to be a lot less," said Michael Gregory of Lehman Brothers.
Most of the tax cuts will expire in 2010. That prompted some House Republican leaders to announce Wednesday they will push legislation to make the cuts permanent.
White House officials have said they believe the cuts will remain in effect beyond the expiration date, without any legislation. "We can't envision a scenario in which the U.S. Congress will want to re-impose" the tax on married couples and the tax on estates, said a senior administration official.
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