Senators dealt a setback to President George W. Bush's economic plan on Tuesday, voting 51 to 48 on an amendment limiting any tax cut to US$350 billion, roughly half of the White House proposal.
The Bush plan has been estimated to cost US$726 billion over 10 years and includes a controversial plan to end taxation on dividends paid to shareholders.
The vote was on an amendment for a blueprint for the US$2.23 trillion fiscal 2004 budget, and several more steps need to be taken on any tax cut proposal. But Tuesday's vote, a reversal from action taken last Friday, signals enough opposition to block or modify the Bush proposal.
"We have lowered the tax reduction by more than half to a more responsible level," Senator John Breaux said of his amendment.
"This was truly a bipartisan effort to reduce the Administration's tax cut by more than half, reduce the deficit and help pay for the war in Iraq. ... At this time of war and economic downturn, the Senate stood up and said the time is not right for a US$726 billion tax cut."
The budget plan, which is expected to clear the Senate this week, must be reconciled with one passed last week by the House of Representatives, which includes the full US$726 billion tax cut.
The cut by the Senate is expected to lead to negotiations between the two chambers on the size and nature of the tax cut, which is expected to pass in some form as part of economic stimulus efforts.
The budget blueprint does not ensure the tax cut package will be enacted, but does signal a commitment by lawmakers to follow the blueprint to enact specific measures, including a tax cut package.
More battles on the tax plan are expected when lawmakers consider specific legislation to enact tax cuts.
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