The Senate Finance Committee on Thursday approved a tax-cut package that trims President Bush's proposed dividend-tax reduction by capping the amount that would be tax-free.

The committee vote was 12-9, mostly along party lines, and it more than halved the amount of overall cuts Bush was looking for.

The bill, which cuts taxes by $350 billion net over 10 years, exempts the first $500 of dividend income from taxes, Reuters reported.

An additional 10% of dividend income above $500 also would be excluded from taxes, with that rising to 20% in 2008-12.

Bush had been seeking $726 billion in cuts.

The House is expected to pass a $550 billion version of Bush's plan that would cut maximum dividend and capital gains tax rates to 15%.