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Wednesday, July 21, 2004

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  Negotiators agreed to keep the three tax cuts in place through 2006. The emerging understanding was described by congressional aides speaking on condition of anonymity because negotiators had not yet announced an agreement.

The White House, however, had asked lawmakers to extend the tax cuts for five years. Sen. Max Baucus of Montana, the top Democrat on the Senate's tax writing committee, said Wednesday that "the White House is still opposed" to the two-year extension.

Senate Majority Leader Bill Frist, R-Tenn., said negotiations remained "fluid." Frist said he'd like to see the tax cuts extended more than two years also, perhaps permanently.

"Is that asking too much at this juncture?" he said. "I don't think so, but I've got a lot of people to consider."

A group of the Senate's moderate Republicans and Democrats had signaled they wanted a short extension, as little as one year.

"Our members are hungry for something that will pass," said Stuart Roy, spokesman for House Majority Leader Tom DeLay, R-Texas. "They want to get something that prevents the tax increase."

"I think the two year deal ought to fly," said Rep. Paul Ryan, R-Wis., early Wednesday morning.

The tax cuts that would be extended increased the child tax credit to $1,000, broadened the bottom 10 percent income tax bracket and lowered taxes for some married couples who pay higher taxes than they would if unmarried. They had been set to expire at the end of the year.

If the tax cuts were left to expire at the end of the year, Americans would see three tax increases: slightly higher income taxes, a $300 reduction in the child tax credit and a reduction in tax benefits for married couples.

The framework also freezes the alternative minimum tax in place for a year. The alternative minimum tax was designed to stop wealthy individuals from avoiding taxes but has started to encroach on less wealthy families over time because of inflation.

Negotiators did not agree to a request by some moderate senators to prevent the tax cuts from worsening federal budget deficits. A small group of Republican and Democrat senators had asked negotiators to offset the cost of the tax cuts by capturing more money for the U.S. Treasury by closing tax shelters and loopholes.

Negotiators did absorb other priorities outlined by the moderate senators, including changes that make the child tax credit more generous to some families. Low-income families could get a larger refund based on the child tax credit this year, and military families would be eligible for a larger benefit.

They also agreed to a popular proposal for simplifying tax laws by replacing the five definitions of a "child" in tax laws with one definition.

© 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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