10 Percent Bottom Tax Bracket May Be Here to Stay

The House on Thursday extended the bottom tax bracket that was created by President Bush’s tax cuts in 2001 and then expanded two years later.

Tax on the first $6,000 in earned wages was lowered from 15 percent to 10 percent in 2001, then broadened in 2003 to cover the first $7,000 earned. The bill passed 344-76, with strong Democratic support despite worries about the ballooning federal deficit, the Associated Press reported.

Without this legislation, those who fall into the 10-percent tax bracket will be pushed into a 15-percent tax bracket by 2011.

"The tax relief this new bracket provided to middle-class taxpayers has proven to be very beneficial for our economy and for hard-working families in Dallas and all across the United States,'" said Dallas Republican Pete Session, the measure's chief sponsor, Bloomberg reported.

Thursday’s vote marked the third time in recent weeks that the House has decided to extend tax cuts that are slated to expire next year. The chamber on April 28 voted to cement in a $105 billion tax cut for married couples, and last week it extended for one year an exemption to keep 8 million taxpayers from paying higher rates because of the alternative minimum tax.

Democrats, concerned about tax cuts at a time of war, offered alternative tax bracket legislation. It would keep the 10-percent tax bracket in place through 2010 and a 1.9 percent surcharge would be levied on those who earn $500,000 or more and on couples who earn at least $1 million. In addition, there would be a requirement that the bottom bracket would extend past 2010 only if the federal budget would be balanced by 2014. The bill was rejected 227-190.

"This is financial madness," said Rep. John Tanner, D-Tenn. "Our country is engaged in a death spiral financially."

All of the piecemeal tax-cuts being passed by the House — lawmakers next week will vote to keep the $1,000 child tax credit from reverting to $700 next year — must be voted on in the Senate.

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