Senate ready for symbolic showdown on tax cuts

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WASHINGTON — Senate leaders moved toward a showdown Wednesday with votes on rival Democratic and Republican plans for extending broad tax cuts that will otherwise expire in January.

In an announcement that seemed to surprise Democrats, Senate Minority Leader Mitch McConnell, Kentucky Republican, said on the Senate floor that he was accepting a Democratic offer to hold back-to-back roll calls on both parties’ bills, with each measure requiring just a simple majority for passage.

The new plan puts pressure on Democrats to avoid an embarrassing defeat of their own tax cut plan, which closely resembles proposals by President Barack Obama to extend tax cuts for all but the nation’s highest earners. Republicans want the top earners to keep their tax cuts, too.

It also raises the stakes for some Democratic senators in close re-election races. The Democratic measure includes items like a sharply higher tax on inherited estates, which could be an issue in states with a high cost of living or with many farms and ranches.

“A vote for the Democrat plan is a vote to put these farms and ranches out of business,” McConnell said.

Until now, the Senate had planned to vote only on the Democratic bill under rules requiring 60 votes to allow debate to proceed. Democrats would not be able to reach that number, but it is often easier for wavering lawmakers to vote for such a procedural motion than it is to vote for a bill on final passage.

“The only way to force people to take a stand is to make sure that today’s votes truly count,” McConnell said, adding, “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.”

Even so, Senate Majority Leader Harry Reid, Nevada Democrat, expressed confidence.

“Our bill has the support of President Obama, has the support of the Democratic caucus, it has the support of the American people,” he said.

In a statement, the White House restated its backing for the plan.

“All sides agree on the need to extend the tax cuts for the middle class,” it said. “This legislation reflects that consensus, and should not be held hostage while debating the merits of another tax cut for the wealthy.”

Democrats have little margin for error. There are 51 Democrats and two independents who usually vote with them.

Sen. Joseph Lieberman, Connecticut Independent, said Wednesday that he will vote against the Democratic bill because he thinks lawmakers should instead be trying to reduce the deficit. Sen. Jim Webb, Virginia Democrat, seemed to indicate that he would vote “no” as well, saying he would not vote to increase any taxes on earned income such as salaries.

Even if the Democratic bill is approved, its significance remains no more than a political statement because it has no chance of surviving in the Republican-run House.

There are 47 Republicans in the Senate, and their measure seems certain to fail. The $405 billion GOP measure would continue tax cuts for everyone next year, including the highest earners.

The $250 billion Democratic bill would continue tax cuts through 2013 for everyone but individuals who earn at least $200,000 yearly and couples making $250,000.

Those taxpayers would face top rates of 36 percent and 39.6 percent, respectively, instead of today’s 33 percent and 35 percent. That would mean higher taxes for 2.5 million households, or 2 percent of all 140.5 million tax returns, according to 2009 data from the Internal Revenue Service.

Democrats say levies on the wealthy should rise because all income groups should contribute to deficit reduction. Republicans say those tax increases would burden the owners of many companies, leaving them less money to create jobs.

The Democratic bill also would let the top estate tax rate grow to 55 percent next year, with only the first $1 million in an estate’s value exempted.

Republicans would renew today’s milder 35 percent top rate, exempting the first $5.12 million. Congress’ nonpartisan Joint Committee on Taxation says the lower Democratic threshold would affect the owners of 55,200 estates whose existing rates are projected to expire next year — a tiny percentage of Americans, but far more than the 3,600 who would be exposed under the GOP’s terms.

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 breaks for low- and middle-income families that Democrats want to extend for college costs; large, some low-income couples and large working families; and for families with children.

All were part of Obama’s 2009 stimulus bill, which Democrats say were meant to be permanent but Republicans say were only a short-term response to the recession.

House Speaker John Boehner, Ohio Republican, was ready to push legislation through his chamber next week that closely mirrors the Senate GOP measure. Republicans there introduced their bill on Tuesday, accompanied by another measure designed to speed work next year on legislation overhauling the entire tax code.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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