Senate passes cuts for all but richest Americans

By Laurie Kellman

Associated Press

Published: Thursday, July 26 2012 1:16 p.m. MDT

Republicans say raising taxes on higher earners saps money from business owners who would otherwise create jobs. Democrats say that's 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 statement.

Though the House and Senate votes are mostly for show, they pose challenges to some lawmakers in tough re-election campaigns.

The Democratic bill would dramatically boost the estate tax, which would be widely unpopular in farming, ranching and high cost-of-living states. It also would increase levies on dividends and capital gains, which are relied on by many elderly people.

Sen. Claire McCaskill, D-Mo., who is in a difficult re-election race, announced she had introduced a bill preventing the estate tax from rising next year. She issued a news release to that effect just minutes after voting for the Democratic bill, which would let estate taxes rise in 2013.

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

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.

Associated Press writer Mark S. Smith and AP Deputy Polling Director Jennifer Agiesta contributed to this report.

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