Senate OKs Dem tax-cut bill in showdown with GOP

Sen­ate Minor­ity Leader Mitch McConnell of Ky., ges­tures dur­ing a news con­fer­ence Tues­day on Capi­tol Hill in Wash­ing­ton, fol­low­ing a polit­i­cal strat­egy ses­sion, as from back left, Sen. John Bar­rasso, R-Wyo., Sen. John Cornyn, R-Texas, and Sen­ate Minor­ity Whip Jon Kyl of Ariz., lis­ten. (Asso­ci­ated Press | J. Scott Applewhite)

ALAN FRAM

Asso­ci­ated Press

WASHINGTON — Democ­rats pushed a year­long exten­sion of tax cuts for all but the highest-earning Amer­i­cans through the Sen­ate on Wednes­day, giv­ing Pres­i­dent Barack Obama and his party a sig­nif­i­cant polit­i­cal vic­tory on a mea­sure that is fated to go no fur­ther in Congress.

Sen­a­tors approved the Demo­c­ra­tic bill by a near party-line 51–48 vote, with Vice Pres­i­dent Joe Biden pre­sid­ing over the cham­ber in case his vote was needed to break a tie. Min­utes ear­lier, law­mak­ers voted 54–45 to kill a rival Repub­li­can pack­age that would have included the best-off in the tax reductions.

The $250 bil­lion Demo­c­ra­tic mea­sure would extend tax cuts in 2013 for mil­lions of Amer­i­cans that oth­er­wise would expire in Jan­u­ary. But it would deny those reduc­tions to the earn­ings of indi­vid­u­als exceed­ing $200,000 yearly and of cou­ples sur­pass­ing $250,000.

With con­trol of the White House and Con­gress at stake in elec­tions less than four months off, pas­sage of the Demo­c­ra­tic bill aligned the Sen­ate with Obama’s tax-cutting vision. Obama has made tax fair­ness — which includes tax increases on the rich — an over­ar­ch­ing theme of his re-election cam­paign, and rejec­tion of the mea­sure would have been an embar­rass­ment for the pres­i­dent and Sen­ate Democrats.

The vote also served as a coun­ter­point to the GOP-run House, which next week will approve tax cuts nearly iden­ti­cal to the $405 bil­lion Repub­li­can plan the Sen­ate rejected Wednes­day. And it lets Democ­rats argue that only the GOP stands in the way of tax cuts for mil­lions of Americans.

“With the Senate’s vote, the House Repub­li­cans are now the only peo­ple left in Wash­ing­ton hold­ing hostage the middle-class tax cuts for 98 per­cent of Amer­i­cans and nearly every small busi­ness owner,” Obama said in a writ­ten state­ment after the vote.

House Speaker John Boehner, R-Ohio, restated his plan for next week’s vote, cit­ing the Demo­c­ra­tic measure’s tax boosts on higher earn­ers. Repub­li­cans say those increases sap money from busi­ness own­ers who would oth­er­wise cre­ate jobs, which Democ­rats say is overblown.

“The House will vote next week to stop that tax hike, and until the Sen­ate does the same, the threat to our econ­omy remains,” Boehner said in a writ­ten statement.

Con­gress’ non­par­ti­san Joint Com­mit­tee on Tax­a­tion has said just 3.5 per­cent of tax­pay­ers with busi­ness income fil­ing indi­vid­ual returns would be exposed to higher taxes next year under the Demo­c­ra­tic bill. But such tax­pay­ers account for 53 per­cent of reported busi­ness income on those returns.

Wednesday’s Sen­ate vote also high­lighted how both par­ties see the tax issue as a win­ning one: Democ­rats because they think it makes the GOP look like defend­ers of the rich, Repub­li­cans because they think it shows Democ­rats don’t care about businesses.

It took just min­utes for Demo­c­ra­tic Sen­ate cam­paign offi­cials to send emails say­ing that Sen. Dean Heller, R-Nev., was “hold­ing tax relief for the middle-class hostage by demand­ing more mil­lion­aire tax breaks.” GOP Sen­ate cam­paign oper­a­tives sent out sim­i­lar emails, with one say­ing Sen. Jon Tester, D-Mont., had voted to “raise taxes on Mon­tana farm­ers, ranch­ers & small busi­ness owners.”

Tester and Heller are in tight re-election con­tests this November.

The two par­ties have been duel­ing over taxes all year. Few expect any real progress until after the Novem­ber elec­tions on pre­vent­ing the tax cuts or avert­ing deep bud­get cuts in Jan­u­ary trig­gered by the fail­ure of law­mak­ers to com­pro­mise last year on debt reduction.

In Wednesday’s vote, two sen­a­tors who will retire next year — Jim Webb, D-Va., and Joe Lieber­man, a Con­necti­cut inde­pen­dent who usu­ally votes with Democ­rats — were that party’s only defec­tors on final passage.

Oppos­ing the GOP mea­sure were Sen. Scott Brown, R-Mass., who faces a tough re-election fight in Novem­ber, and Sen. Susan Collins, R-Maine. Sen. Mark Pryor, D-Ark., who could have a tight re-election in 2014, voted for both the Repub­li­can and Demo­c­ra­tic plans.

“If the wealth­i­est peo­ple in Amer­ica can’t get a tax break, the Sen­ate Repub­li­cans say, ‘No one gets a tax break,’” Sen. Richard Durbin of Illi­nois, Sen­ate Democ­rats’ No. 2 leader, said after the roll calls. “That was what these two votes tell us.”

Repub­li­cans said the mea­sure was all about Demo­c­ra­tic pos­tur­ing for the upcom­ing elections.

“Thank good­ness it’s not going any­where because it would be bad for the econ­omy, the sin­gle worst thing we could do to the coun­try,” Sen­ate Minor­ity Leader Mitch McConnell, R-Ky., said.

Repub­li­cans were hop­ing that sev­eral Democ­rats seek­ing re-election would hurt their can­di­da­cies by hav­ing backed the Demo­c­ra­tic pack­age. The bill would dra­mat­i­cally boost the estate tax, which would be widely unpop­u­lar in farm­ing, ranch­ing and high cost-of-living states, and increase levies on div­i­dends and cap­i­tal gains, which are relied on by many elderly people.

“That’s what today’s votes are all about,” McConnell said in a thinly veiled warn­ing to Democ­rats. “Show­ing the peo­ple who sent us here where we stand.”

Illus­trat­ing the poten­tial high-voltage polit­i­cal impact of the vote, Sen. Claire McCaskill, D-Mo., who is in a tight re-election race, announced she had intro­duced a bill pre­vent­ing the estate tax from ris­ing next year, and Tester co-sponsored it. She issued a news release to that effect just min­utes after vot­ing for the Demo­c­ra­tic bill, which would let estate taxes go much higher in 2013.

Under the Demo­c­ra­tic mea­sure, indi­vid­u­als earn­ing over $200,000 and cou­ples mak­ing at least $250,000 would see their top rates on those earn­ings rise from 33 per­cent and 35 per­cent today to 36 per­cent and 39.6 per­cent in January.

That increase would affect 2.5 mil­lion house­holds, or 2 per­cent of all 140.5 mil­lion tax returns, accord­ing to 2009 Inter­nal Rev­enue Ser­vice statistics.

The White House said that if the tax cuts were not con­tin­ued, mid­dle class fam­i­lies would face aver­age tax increases next year of $1,600. It also said that the GOP bill would grant tax reduc­tions aver­ag­ing $160,000 to house­holds where income exceeds $1 mil­lion annually.

The Demo­c­ra­tic bill would also boost the top tax rate paid by peo­ple who inherit estates to 55 per­cent, exempt­ing the first $1 mil­lion in an estate’s value. The GOP mea­sure would main­tain today’s 35 per­cent top rate and would not tax the first $5.12 mil­lion of an estate’s value.

In fresh fig­ures released this week by Repub­li­cans, Con­gress’ non­par­ti­san Joint Com­mit­tee on Tax­a­tion esti­mated that the Demo­c­ra­tic pro­vi­sion would affect 55,200 estates next year, com­pared with 3,600 who would face estate taxes under the GOP plan.

Democ­rats would impose top tax rates next year of 20 per­cent on div­i­dends and cap­i­tal gains, two sources of income enjoyed dis­pro­por­tion­ately by the wealthy. The GOP top rate would be 15 percent.

The GOP bill ignores some tax cred­its for low– and middle-income fam­i­lies that Democ­rats want to extend for col­lege costs; for some low-income cou­ples and large work­ing fam­i­lies; and for fam­i­lies with children.

All were part of Obama’s eco­nomic 2009 stim­u­lus bill. Democ­rats say those tax breaks were meant to be per­ma­nent but Repub­li­cans say they were only a short-term response to the recession.

Posted by AP News on Jul 25 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.