Senate sets votes on two proposals to extend tax cuts

By Ryan J. Donmoyer and Richard Rubin

Bloomberg News

Published: Friday, Dec. 3 2010 10:22 p.m. MST

WASHINGTON — Senate Democrats defended their plan for weekend votes on two proposals that would extend Bush-era tax cuts only for middle-income taxpayers while conceding the measures are unlikely to pass.

Procedural votes on the two proposals were scheduled for 10:30 a.m. Washington tomorrow time by Senate Majority Leader Harry Reid of Nevada. Republicans said Democrats are engaging in political theatrics to consider extending only some of the tax cuts while President Barack Obama is negotiating a possible extension of all tax rates for several years.

The tax cuts enacted in 2001 and 2003 expire on Dec. 31.

"Americans don't want to see meaningless theater in Congress; they want us to do something about the economy," Senate Republican Leader Mitch McConnell of Kentucky said in a floor speech today.

New York Senator Charles E. Schumer, the Senate's No. 3 Democrat, conceded that neither proposal is likely to succeed because Democrats need 60 votes to overcome procedural hurdles in the Senate. The Democrats control 58 votes.

A defeat of the proposals would increase pressure on negotiators to reach a compromise, and Obama said yesterday that he is "confident" one will emerge before Dec. 31.

"This is an opening salvo for an argument that will continue for a very long time," Schumer told reporters. The votes, he said, are about "putting pressure" on Republicans "to come around to the view of what America wants, what's right for the country and we are going to keep doing it."

The Senate votes 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 married couples' annual income, and another that would extend the lower rates on the first $1 million of income.

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 Sen. Orrin Hatch, R-Utah, set to be the ranking Republican on the Finance Committee in January.

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."

The House 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.

Meanwhile, a six-member panel appointed Nov. 30 by the president and congressional leaders to negotiate the tax issue plans to continue its talks.

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

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, 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.

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