Senate Sets Dec. 4 Vote on Extending Bush-Era Tax Cuts as Talks Continue

December 3, 2010

Bloomberg

Ryan J. Donmoyer and Richard Rubin

The U.S. Senate is scheduled to vote tomorrow on two Democratic proposals to extend Bush-era tax cuts before they expire at the end of the month, Senate Majority Leader Harry Reid said. Neither proposal is likely to pass.

Reid, a Nevada Democrat, said the Senate would follow yesterday’s House passage of a measure to extend lower rates only for middle-class Americans. The Senate proposals include a version of the House bill, which sustains lower rates only on the first $250,000 of a married couple’s annual income, and another that would extend the lower rates on the first $1 million of income.

Reid earlier yesterday had been prepared to allow votes on two competing Republican proposals, senators said. That plan changed suddenly when an unidentified Republican senator objected to having all four votes today, Reid said.

New York Senator Charles Schumer, a Democrat who proposed the $1 million threshold, said Democrats’ message would carry the day.

“They are standing by their millionaires’ tax break, and I don’t think the American people are going to like that very much,” Schumer said of his Republican colleagues.

Republicans have vowed to block any measure that doesn’t extend all of the Bush-era tax policies, saying that expiration of the lower rates for upper-income taxpayers would hurt job creation and the economic recovery.

“They want only permanency for the so-called middle class, but forget about small-business people who pour their money back into their business to be able to create jobs,” said Utah Senator Orrin Hatch, who is set to be the ranking Republican on the Finance Committee in January.

Senate Passage Unlikely

Both of the Democratic proposals would need 60 votes to overcome procedural hurdles in the Senate and pass -- unlikely if the votes fall along party lines, because the Democratic Caucus has 58 members. Rejection of the proposals would probably set up a compromise, and President Barack Obama said yesterday that he is “confident” one will emerge before Dec. 31.

If Congress fails to act, taxes will increase across the board on Jan. 1.

Connecticut Senator Joe Lieberman, an independent who caucuses with the Democrats, said after a meeting of Senate Democrats yesterday, “This is like the opening round in which each party will set out their wish lists. None of them have enough votes.”

Earlier in the day, the House passed a Democratic plan to extend Bush-era tax cuts for middle-income families over the objections of Republicans.

House Vote

The vote was 234-188 for the measure, which would permanently extend lower rates and expanded tax credits on the first $200,000 of individuals’ income and the first $250,000 for married couples who file joint returns. Taxpayers with higher annual incomes would face increased taxes on wages, capital gains and dividends.

Republicans derided the House vote as political theater, and House Minority Leader John Boehner of Ohio said it was “chicken crap.”

Reid said yesterday that “a number” of Senate Democrats were willing to adjourn for the year without extending the tax cuts. When asked about the possibility of all the tax cuts expiring, Illinois Senator Richard Durbin, the chamber’s No. 2 Democrat, said, “It’s not totally off the table.”

Meanwhile, a six-member panel appointed Nov. 30 by the president and congressional leaders to formally negotiate the tax issue met for about 30 minutes in the Capitol.

Two people familiar with the talks said Treasury Secretary Timothy Geithner asked for a line-by-line review of the package of more than 70 provisions, most of which expired last year.

Tax-Cut Talks

Much of the group’s first three meetings have focused on educating Geithner and Budget Director Jack Lew about the provisions, known on Capitol Hill as “tax extenders” because they are renewed almost routinely, the people said. About 80 percent of the provisions benefit businesses.

Shortly after the meeting broke up yesterday, Senate Finance Committee Chairman Max Baucus introduced a comprehensive bill that extends lower rates on income, as well as capital gains and dividends, only on the first $250,000 of a married couple’s income. His measure, which is one of the two bills to be considered tomorrow, also would reinstate the federal estate tax in 2011 with a top rate of 45 percent and $3.5 million tax- free allowance, both of which were in place in 2009.

Lieberman said he would probably oppose the measures because they would add trillions of dollars to the federal budget deficit. “It seems like a strange thing to do on a day when the fiscal responsibility commission is telling us how to save trillions of dollars,” he said.

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