In April, President Bush said the Senate's proposed $350 billion tax cut was a "little bitty" measure compared to the $726 million cut he wanted.

On May 21, the president reassessed the political landscape, and endorsed the lesser tax cut as a means to stimulate the economy and create the one million jobs he has set as a goal. Congress approved the $350 billion cut late last month. The House had previously approved a $550 million cut in taxes, but a few moderate Republicans in the Senate joined the vast majority of Democrats in the House in questioning whether a tax cut will stimulate the economy - and whether the nation can afford the reduction in revenues at all.

Democrats, in the minority in both the House and Senate, were mostly frozen out of the negotiations, and according to the Washington Post, denounced the compromise as a backroom deal with little economic value. Rep. Charles B. Rangel (N.Y.), the ranking Democrat on the House Ways and Means Committee, called the measure "a bill that would shift the tax burden to states and cities, and pile up more debt on the backs of our children."

The Post called the deal "a significant retreat for Bush."

The plan calls for freezing most dividends and capital gains at a 15 percent taxation rate through 2008. Right now, dividends are taxed the same as ordinary income or by as much as 38.6 percent for taxpayers in the highest tax bracket.

This has been labeled as a tax cut for the rich because about 80 percent of all dividend income goes to higher-income households - and about one-third of the entire tax cut will allow them to enjoy lower tax rates on dividend income from stocks and bonds

The deal would also expand the child credit, now $600, to $1,000; immediately lower income tax rates that were scheduled to phase in through 2006; reduce taxes for married couples, 
expand investment tax breaks for large and small businesses, and grant $20 billion in aid to cash-strapped state and local governments.

"This bill misses a real opportunity to get the economy back on track and help Americans who are struggling,'" Senate Minority Leader Tom Daschle, D-S.D., said in a statement. "Instead, it gives away billions to those who need it least and does very little for those who need it most."