Senate thinks of voters as it OKs tax cuts for all but top 2 percent
Democrats believe Wednesday's votes will help President Obama draw a contrast with Republican rival Mitt Romney and strengthen Democratic lawmakers' election-year argument that Republicans are holding middle-class tax cuts hostage in order to maintain breaks worth $160,000 a year to the average millionaire.
WASHINGTON — The Senate on Wednesday narrowly approved an extension of Bush-era tax cuts for all but the top 2 percent of taxpayers — and defeated a Republican bill that would include everyone — an action intended more to give both parties election-year cover than to produce a new tax law.
Democrats believe the votes will shift the tax debate in a Congress that has been stalemated by partisan inaction. They help President Obama draw a contrast with Republican rival Mitt Romney and strengthen Democratic lawmakers' election-year argument that Republicans are holding middle-class tax cuts hostage to maintain breaks worth $160,000 a year to the average millionaire.
"If House Republicans insist on blocking our middle-class tax cuts, that is a debate we are willing to have," Sen. Charles Schumer, D-N.Y., said in a speech on the Senate floor. For more than a decade, he said, Republicans "have conflated tax cuts for the middle class and tax cuts for the very wealthy. This bill breaks that vice."
The day began on a surprising note as Republican leader Mitch McConnell announced he would forgo an expected filibuster and permit an up-or-down vote on the Democratic measure, in exchange for an agreement by Majority Leader Harry Reid, D-Nev., to call a vote on the GOP bill as well.
McConnell acknowledged the unusual nature of his decision — Democratic aides couldn't recall another occasion when he permitted a simple majority vote on a contentious issue.
He said his goal was to force vulnerable Democrats such as Missouri Sen. Claire McCaskill and Montana Sen. Jon Tester to support a plan to increase taxes.
"By setting these votes at a 50-vote threshold, nobody on the other side can hide behind a procedural vote while leaving their views on the actual bill itself a mystery to the people who sent them here," McConnell said.
Moreover, he noted, a Senate-originated tax bill cannot advance. The Constitution requires all tax measures to originate in the House.
"The only reason we won't block it today is that we know it doesn't pass constitutional muster and won't become law," McConnell said. "What today's votes are all about," he said, is "showing the people who sent us here where we stand."
In twin votes, the Senate, by a vote of 54-45, defeated the GOP plan, which would have extended all tax cuts for one year before they expire Jan. 1. Then, on a 51-48 vote, the Senate approved the Democratic version.
House Speaker John Boehner, R-Ohio, has set votes for next week on the GOP proposal.
Under the Senate-passed bill, income-tax rates for couples' taxable earnings that exceed $250,000 would rise from 33 percent to 36 percent. Tax rates on taxable income of more than about $390,000 would rise from 35 percent to 39.6 percent. The rate on most dividends and capital gains would rise from 15 percent to 20 percent for taxable incomes exceeding $250,000.
The GOP bill would increase the deficit by $408 billion over five years, but that includes $102 billion to stave off an expansion of the alternative minimum tax in 2014, something Democrats say they would do as well. Certain tax breaks for middle- and lower-income earners that were first approved as part of Obama's economic-recovery program in 2009 also would be dropped. Republicans say those tax breaks for college costs and tax refunds for the working poor have not helped to stimulate the economy.
The Democratic bill would increase the deficit by $251 billion, but that number would rise if Democrats blunt the return of the 1990s estate tax.
If nothing is done, the current estate tax — a 35 percent rate on inheritances worth more than $5 million, $10 million per couple — would snap back to the rates under former President Clinton, 55 percent over $1 million, $2 million per couple. Rural-state Democrats said they would move to blunt that increase this year.
Polling suggests strong support for a tax increase on the wealthy, but both parties showed strains. Sen. Scott Brown, R-Mass., locked in a tough re-election fight, voted against the GOP tax plan, as did Sen. Susan Collins, R-Maine. Sen. Mark Pryor, D-Ark., voted yes.
On the Democratic plan, meanwhile, Sen. Jim Webb, D-Va., voted no, reiterating that taxes should increase on capital gains and dividends, so-called "passive" income, but should stay steady on earned income. Sen. Joe Lieberman, I-Conn., voted no and said he also favors tax increases to deal with a deficit that again is expected to top $1 trillion this year.
"People who make the most will pay more than others, but I think it's not reasonable or acceptable to say someone making less than $250,000 a year shouldn't also contribute to getting us out of the debt," Liebermann said.
Compiled from the Tribune Washington bureau, The New York Times and The Washington Post