Vice President Dick Cheney, who reported $278,103 in corporate dividend income in 2001, cast the tie-breaking vote (51–50) May 15 on a Senate tax cut measure that would eliminate taxes on dividend income. The dividend tax cut would have saved Cheney $107,000 based on his 2001 dividend income.

The Senate then passed a further tax cut for millionaires that, with the tax dividend cut, could cost as much as $660 billion and drive the federal deficit beyond its $300 billion-plus level. That record level could go even higher by the end of the fiscal year, according to recent estimates by the nonpartisan Congressional Budget Office. The bill passed 51–49 with three Democrats supporting it and three Republicans opposed.

While the Senate bill provides the wealthiest 1 percent of taxpayers more than $69,000 total over the next four years, the vast majority of taxpayers, those in the bottom 60 percent, would see about $100 a year, according to Citizens for Tax Justice.

Although congressional supporters claimed the tax cut would cost $350 billion, that figure was arrived at through “gimmicks,” says Sen. John Breaux (D-La.), who supported Bush’s $1.3 trillion millionaire tax cut in 2001 but voted against this tax giveaway. The Center on Budget and Policy Priorities estimates that if the corporate dividend tax cut and other temporary tax cuts in the bill were calculated on a full 10-year span, the bill would cost some $660 billion—almost double the official price tag.

“It’s a starkly elitist tax break,” says Senate Minority Leader Tom Daschle (D-S.D.). “The fortunate few will be able to shelter all their investment income, while working Americans will continue to pay taxes and shoulder the obligations of our nation.”

“To get the votes, they had to resort to gimmickry,” says Breaux.

For example, while the cost of tax bills normally is calculated over 10 years, portions of the Senate bill provide only temporary tax cuts, hiding the full 10-year cost and sticking to the $350 billion tax cut allotment in the Senate budget resolution passed in February, Republican senators admitted they plan to fight to make the tax cut permanent to bring the bill more in line with the $550 billion House version that passed May 9 and with President George W. Bush’s original $726 billion tax scheme.

Under the $550 billion House bill, the nation’s richest .1 percent of the population would pocket approximately $139 billion in tax cuts through 2013, the Center on Budget and Policy Priorities reports—essentially the same amount of tax cuts that would go to the entire bottom 89 percent of households combined. Along with reducing the rate at which corporate dividends are taxed, the House version also reduces capital gains taxes.

Center Executive Director Robert Greenstein says, “While budget gimmicks are hardly new to Washington, they reached new heights with the 2001 tax cut and the gimmicks in the House and Senate bills are even more outrageous.” He called the math behind both the Senate and House bills “Enron-style accounting” in which budget projections “are universally seen as unreliable and even fraudulent, because they are based on assumptions everyone knows to be false, such as that various major tax breaks will simply be allowed to expire.”

The two bills now go to a Republican-majority House-Senate conference, which will reconcile the two bills.

Congress is expected to vote on a reconciled version of the two bills before Memorial Day.      

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