Tax Cut Bill Becomes Law

President Bush, who pushed Congress to cut taxes as insurance against an economic downturn, signed into law Thursday the largest across-the-board reduction in taxes in a generation.

And with his signature, he accepted responsibility for the nation’s economic course, good or bad.

Weaving words of praise and appreciation for Democrats throughout his remarks, the president portrayed the $1.35-trillion, 10-year package as beneficial to all.

“We cut taxes for every income-tax payer. We target nobody in, we target nobody out. And tax relief is now on the way,” he said in a ceremony in the White House East Room.

Critics argue that the measure bends dramatically toward the wealthy--with 38% of the benefits going to the richest 1% of the nation’s taxpayers--and could harm the economy.

The legislation was the centerpiece of Bush’s economic plan, one that he said in a joint speech to Congress would “give our economy an important jump start.”

Now, said Bill Frenzel, a former Republican member of Congress from Minnesota, Bush has lost some opportunity to blame his predecessor for any economic problems he may encounter.

“From a political standpoint, people are going to say he got what he wanted; how come things aren’t beautiful?” Frenzel said.

To emphasize the effect the tax cut would have on those he called “hard-working Americans,” Bush invited more than a dozen families to the ceremony that he had brought to his campaign rallies as examples of people who would pay lower taxes under his plan.

“Tax relief is a great achievement for the American people,” the president said.

The immediate effect of the tax cut, close to the $1.6-trillion package the president sought, will be a rebate check sent by the government to the nation’s taxpayers: as much as $300 for individuals, $500 for single parents and $600 for married couples.

The Treasury Department estimated that 10.6 million checks worth $4.5 billion will be sent to Californians. Democrats complained that the rebate checks will not go to 34 million taxpayers who pay only payroll taxes, not income taxes.

Other key elements of the measure:

* The top income tax rate is cut from 39.6% to 35% by 2006. The rates in other brackets would be reduced by 3 percentage points, with part of the cuts to take effect immediately and be reflected in lower paycheck withholdings after July 1.

* The $500-per-child tax credit for families is gradually doubled.

* The standard deduction for couples is increased, and other tax relief is provided for married taxpayers. These reductions will not start immediately and will be phased in over the next decade.

* A new tax deduction is provided for college tuition.

* The estate tax is repealed in 2010, and its rates are gradually reduced before then. But without further action, it would be reimposed in 2011.

* The amount of money that people can contribute to their individual retirement accounts and 401(k) plans is increased.

The celebratory tenor at the White House was tangible. Bush’s chief strategist, Karl Rove, slapped backs around the East Room; three charter buses brought members of Congress to the White House; and First Lady Laura Bush, who seldom takes part in the official business of the presidency, sat in the front row of the audience.

In brief remarks before he signed the measure, Bush noted that only twice since World War II had Congress passed such widespread tax cuts--in the 1960s, when John F. Kennedy was president, and in the 1980s, during Ronald Reagan’s presidency.

“Now it’s happening for the third time, and it’s about time,” the president said.

Echoing his oft-repeated lines from recent rallies, the president said that, a year ago, critics said it was politically impossible to pass such a tax measure, and six months ago they called it a political liability.

“Today, it becomes reality,” he said, attributing that reality to “the bipartisan leadership” in Congress.

One day after control of the Senate switched to Democratic hands, with Vermont Sen. James M. Jeffords’ departure from the Republican Party to independent status, Bush mentioned by name four Democrats who supported the measure in the House and Senate--suggesting a readiness to credit the support of centrist Democrats he will need in future votes.

But many Democrats were sharply critical of the measure. They said it was skewed to the wealthy, would restrict government spending and would put the economic recovery of the last decade at risk.

Seeming to prepare the groundwork for blaming Bush if budget deficits return or the economy goes sour, Rep. Charles B. Rangel (D-N.Y.), said: “Today we have a sound fiscal policy after it has taken us years to pull us out of deficit spending. . . . But tomorrow you won’t.”

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Times staff writer Janet Hook contributed to this story.