With our country at war, the last thing President Bush wants is a mutiny -- but that's exactly what he just got.

This mutiny isn't taking place on the battlefield, nor does it have anything to do with foreign policy. Rather, the Senate just gutted the administration's cornerstone piece of domestic policy: the proposed tax cuts.

In a remarkable vote Tuesday afternoon, the Senate hacked away at President Bush's proposed $726 billion tax cut and instead voted 51 to 48 in favor of a $350 billion tax cut.

Sponsored by a bipartisan coalition, the $350 billion tax-cut package was initially defeated last Friday in a 62-38 vote, largely because several moderate senators -- such as Arizona Republican John McCain and South Carolina Democrat Ernest Hollings -- refused to vote in favor of any tax cuts, particularly while the nation is at war.

And once it became evident that the proposal would not pass, several Democrats originally in favor of it switched their votes to "no," making the final tally "deceiving," according to the Washington tax policy trade publication BNA.

But clearly that was not the proposal's demise. The measure that the Senate did approve last week included an amendment that took $100 billion out of President Bush's tax-cut proposal, and put it into a war fund. Senate Majority Leader Bill Frist (R., Tenn.) voted for the amendment at the last minute, which enabled him to put the entire package to another vote this week.

And in Tuesday's vote, Sen. Hollings and others voted in favor of the $350 billion tax cut package.

The package decimates the Bush administration's domestic fiscal agenda. President Bush had called for $396 billion in tax cuts on dividends alone. His total plan, which included an additional $600 billion cost to making his 2001 tax-cut package permanent, would have cost the federal government $1.3 trillion over 10 years.

Democrats and many moderate Republicans have argued that this is hardly the time to cut revenue to the government -- the already-huge deficit is expected to balloon, and the war in Iraq will be costly.

The House of Representatives also voted its budget proposal on Friday, only that plan included the president's full $726 billion in tax reductions.

The next step will be a big one: The Senate and the House will have to reconcile both their proposals before sending a bill to the president. And that will likely be quite a battle.