What a magical phrase -- "middle-class tax cuts."
Six weeks before the presidential election, that expression can make Congress move with mercurial speed to extend four Bush administration tax cuts about to expire and even get presidential challenger Sen. John Kerry to go along.
Late Thursday, less than 24 hours after the House of Representatives and the Senate each drew up individual proposals, both chambers voted overwhelmingly to extend temporarily four tax cuts mainly affecting the middle class: the $1,000 child tax credit, the marriage penalty relief, the expanded 10% tax bracket, and relief from the alternative minimum tax.
"This was a lead-pipe cinch," said Bill Frenzel, a guest scholar at the Brookings Institute in Washington, D.C., and a former Republican congressman from Minnesota for 20 years who was a key player on the House Budget Committee. "It's the kind of thing that everyone loves to vote for before the Election Day."
It's certainly the kind of thing that President Bush is going to love to sign into law in the remaining days before the election and he's expected to when the bill arrives at the White House.
Kerry said he voted for the package because millions of Americans families who have been squeezed by the weak Bush economy need help from middle-class tax breaks.
The House passed the bill 339-65, and the Senate approved it less than an hour later, 92-3. There apparently was little time to ruminate on the bill's cost, $146 billion, which has no offsetting income. The Bush administration was already on its way to hitting a record $422 billion annual budget deficit this year.
Both Kerry and Bush have vowed to reduce the nation's federal debt of $7 trillion, but political and economic observers are skeptical. This latest legislation is just a case in point.
"All we're doing is deferring debt and future taxes to other generations," said Frenzel. "It increases the deficit in the out years. It makes the tasks of future congresses and presidents more difficult."
The tax cut with the biggest price tag is undoubtedly the most popular, the child tax credit, which the Congressional Joint Tax Committee estimates will cost $61.6 billion.
Extending the 10% bracket will cost $29.4 billlion, the alternative minimum tax relief, $22.6 billion, and marriage penalty relief, $15.7 billion. The bill also contains other individual and business tax reductions.
Like the measures they are designed to fix, these tax relief provisions are temporary:
The child tax credit will remain at $1,000 per child for families who qualify, through 2009. Until Congress acted, the law had been set to reduce the credit from $1,000 this year to $700 for taxable years 2005-08.
The marriage penalty relief, which alleviates some of the disparity married couples suffer under the tax code compared to single filers, will remain in effect through 2008, rather than falling away after 2004.
The expanded 10% tax bracket, which lowers taxes for all taxpayers but particularly for the working poor, will be extended to 2010.
Relief from the alternative minimum tax, or AMT, scheduled to disappear in 2004, will extend one more year, through 2005. The AMT, perhaps the most disliked portion of the IRS regulations because of what many see as an inherent unfairness, was conceived by Congress to guarantee that the ultra-wealthy didn't avoid paying income taxes by using loopholes.
Rather than plug loopholes, Congress decided to create an alternate tax world, where the usual tax deductions and credits don't apply. If taxpayers were rich enough, they would trip certain triggers and have to pay taxes in this AMT world.
Because the AMT is not indexed for inflation, while most everything else is, it has snared an ever-increasing number of middle-class taxpayers. And they have been paying an ever-mushrooming share of tax revenues.
Frenzel said that Congress needs to fix the AMT and fast. "It's just an idiotic concept, something only a Congress could do," he said. "More and more people are going to get caught in it."
If Congress wants to tax the means that wealthy people use to earn money, they should go after tax-free municipal bonds, dividends and capital gains, said Frenzel. "Congress created a monster and has to figure out what to do about it."
Before joining TheStreet.com, Ann Perry was the personal finance columnist for The San Diego Union-Tribune. She is the author of "The Wise Inheritor: A Guide to Managing, Investing and Enjoying Your Inheritance" (Broadway Books, 2003). She has a B.A. in English and Communications from Stanford University and a master's degree from the Columbia University School of Journalism. She can be reached at