WASHINGTON – The Senate gave final approval Thursday to a $70 billion election-year package of tax cuts that will extend lower rates for investors and also save billions for families with above-average incomes.

Republicans promised the bill will produce economic gains for the nation – and hoped it would give a much-needed boost to President Bush and the GOP-controlled Congress as they both experience their lowest approval ratings in polls since his election in 2000.

The bill passed the Senate by a 54-44 vote, and Bush is expected to sign it next week.

Sen. Susan M. Collins, R-Maine, voted for the package, and Sen. Olympia J. Snowe, R-Maine, voted against it.

Bush said in a statement that the bill “prevents an enormous tax hike that the American people do not want and would not welcome.”

The legislation provides a two-year extension of the reduced 15 percent tax rate for capital gains and dividends, now set to expire at the end of 2008.

It also will extend for one year recent changes to the alternative minimum tax to prevent it from hitting more upper-middle-income families.

The AMT was designed to hit the very wealthy, but it is now common for taxpayers, especially those with families in high-tax states, to pay the AMT on incomes of $100,000 and more.

The debate followed partisan lines, with Republicans eagerly crediting the tax cuts, first enacted in 2003, with a surging economy, millions of new jobs and booming tax revenues. Democrats overwhelmingly opposed the bill, saying its tax cuts on capital gains and dividends will flow mostly to wealthy.

Just three Republicans -Snowe, Lincoln Chafee of Rhode Island and George Voinovich of Ohio – voted against the bill. Democrats Ben Nelson of Nebraska, Bill Nelson of Florida and Mark Pryor of Arkansas voted in favor.

Republican Gordon Smith of Oregon originally registered a “nay” vote but changed to “aye” just before the tally was announced.

Republicans said to fail to extend the tax cuts would amount to a tax increase on investors, big and small, as well as on families facing the alternative minimum tax. They’ve dubbed the bill the “Tax Increase Prevention Act.”

“Are we going to increase taxes on well over 100 million people … or are we going to keep taxes low?” said Majority Leader Bill Frist, R-Tenn.

Democrats countered that Republicans were favoring the wealthy and even oil companies while letting languish Senate-passed tax breaks on college tuition and state and local sales taxes, as well as a research and development tax credit for businesses. Each expired in December.

They blasted GOP negotiators for dropping a Senate-passed provision that would have closed an inventory accounting practice known as “last in, first out” that is used by oil companies and other businesses to help lower their tax burden.

“The Bush administration and the Republican leadership are far more interested in helping their wealthiest friends than hardworking, middle-class Americans,” said Charles Schumer, D-N.Y. “The GOP made its choice, and they chose millionaire investors and oil companies over middle-class families.”

But passage of the bill is the first step of a two-track strategy for advancing the GOP’s election-year tax cut agenda. Finance Chairman Charles Grassley, R-Iowa, said again Thursday that another bill containing widely backed tax cuts favored by Democrats would advance soon as part of a follow-up bill.

The first measure focused on investor tax breaks and alternative minimum tax relief, and it can advance under special rules blocking Senate Democrats from filibustering it to death. Grassley said the later bill would contain about $22 billion to $23 billion in tax breaks backed by Republicans and Democrats.

Those include preserving tax deductions for state and local sales taxes, a tuition tax deduction, a tax break for teachers who buy their own school supplies, and the R&D tax credit for businesses.

Even though Democrats generally opposed Thursday’s bill, they are big supporters of alternative minimum tax relief, which is the single costliest part of the bill at about $34 billion.

The AMT was established in 1969 to ensure all taxpayers pay at least some tax, but it was not indexed for inflation. Now, it often hits better-off taxpayers in Democratic-leaning high-tax states such as New York and California, where it threatens benefits such as the child tax credit or state tax deductions.

The bill would raise the level of income exempt from AMT calculations to $62,550 for married couples and $42,500 for singles through Dec. 31, 2006.