U.S. Congress attempts to pass FY09 budget

By Richard Cowan and Donna Smith

WASHINGTON, March 13 (Reuters) - The U.S. Senate overwhelmingly approved extending some of President George W. Bush's tax cuts on Thursday as Congress tried to complete work on a budget blueprint for fiscal 2009 that aims to end deficit spending within four years.

By a vote of 99-1, the Senate passed a Democratic amendment to permanently extend a 10 percent tax rate, mostly for low-income earners, along with a child tax credit and marriage penalty relief. These provisions are due to expire at the end of 2010. A Republican amendment that would have extended the remaining tax cuts was defeated.

The budget debate and controversy over spending priorities and taxes is expected to spill over into the presidential and congressional campaigns for the November elections.

The three senators running for president -- Democrats Hillary Clinton of New York and Barack Obama of Illinois and Republican John McCain of Arizona -- interrupted their campaigns to vote on the budget. All three voted for the Democratic tax amendment but only McCain backed the Republican proposal.

McCain, who initially opposed Bush's tax cuts, now embraces them.

Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said his measure also would create a new property tax deduction for homeowners, including those who do not currently file itemized tax returns.

The initiative, Baucus said, "would maximize the budget's help for America's working families."

The annual budget plan is nonbinding. It is up to Congress' tax-writing committees later this year to advance legislation implementing the tax changes.