Dividend Relief Reborn in Senate Bill

The Senate is a little closer to resolving the unprecedented (even by congressional standards) contention surrounding the tax cut, and a reduction of the dividend tax is among the measures it's embracing once again.

The Senate Finance Committee -- headed by Iowa's moderate Republican Charles Grassley -- hammered out a $430 billion tax-cut package late Wednesday night.

That's still far less than the $550 billion plan the House Ways and Means Committee is working on, but it's more than the $350 billion the Senate steadfastly insisted it wouldn't go beyond.

In an unparalleled (and somewhat untoward) move last month, the Senate and House each essentially agreed to disagree on how much the federal government should allot for tax cuts in the 2004 budget. The House was to go ahead with its $550 billion tax-cut plan, while the Senate -- which has a slim Republican majority and no shortage of moderates -- insisted that it would not allow more than $350 billion in tax cuts to get into the budget.

That amount ensured a thorough eviscerating of President Bush's $726 billion plan, and all but guaranteed that the $396 billion cornerstone of his plan -- the elimination of the tax on dividends -- would not make it through.

But in a move that attempts to appease Democrats and moderate Republicans while still getting a little bit of dividend-tax relief through, the Senate Finance Committee settled on a partial plan that will benefit the majority of dividend stock investors.