U.S. Senate clears 11-year, 1.35 trln usd tax cut

WASHINGTON (AFX) - The Senate approved an 11-year, 1.35 trln usd tax cut, in a step towards Congressional passage of a final tax cut package.

The Senate approved the bill 62-38, with 12 Democrats joining all 50 Republicans in clearing the measure. 

The bill includes 100 bln usd of tax-cut stimulus this year and next. 

The Senate must now negotiate in conference with the House of Representatives, which passed in pieces the bulk of President George Bush's 1.6 trln usd, 10-year tax cut.

Senate approval was delayed by votes on dozens of amendments to the bill proposed mainly by Democrats. Although they were all rejected, the amendments established solid opposition to the bill among most Democrats.

The Senate bill includes across-the-board reductions in marginal income tax rates, eventual repeal of the inherited estate tax, expansion of tax free retirement accounts, lower taxes on married couples, and expanded credits for children.

Treasury Secretary Paul O'Neill said earlier he expected the Congress to agree on and pass a compromise bill by the end of the week.

Private analysts said the House-Senate negotiations likely will take weeks to resolve, predicting the President will sign the final bill ahead of the July 4 holiday.

O'Neill noted, however, that analysts had previously forecast that a tax cut would not be enacted until September. 

The final version of the tax cut is expected to be close to the 1.35 trln usd size of the Senate version, which would still be the largest U.S. tax cut in two decades.

However, the final shape of the tax cut debate could change if, as expected, Republican Senator James Jeffords switches affiliations to become an independent and gives the Democrats majority leadership in the Senate.

The move could directly impact House-Senate negotiations on a final tax cut bill, if the Democrats are able to appoint a majority of the Senate's representatives on the conference committee between the two bodies.

The House, currently with a Republican majority, will send a Republican-majority team to the conference committee.

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