Senate Set for Symbolic Showdown on Tax Cuts

senate tax cuts

WASHINGTON -- The Senate is bracing for a tax-cut showdown that is all about Democrats and Republicans showing voters their differences over taxing the well-off while accusing each other of threatening to shove the government over a fiscal cliff.

Senators planned to vote Wednesday on a $250 billion Democratic bill that would extend expiring tax cuts next year for all but the highest earners. Democrats will need 60 votes to advance the proposal, which they do not have.

It seemed unlikely that senators also would vote on a rival GOP plan that includes the best-off Americans in the tax reductions, a measure that was destined to lose.

House Speaker John Boehner, R-Ohio, 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.

The clash in the Senate underscored how little the partisan tax-cutting duel had to do with actually passing a law this year. If anything, it highlighted how entrenched both parties' views were.

"Democrats will simply never agree we should hand out more tax breaks to the richest 2 percent of Americans while this economy is in the situation it's in now," said Senate Majority Leader Harry Reid of Nevada, sponsor of the Democratic bill.

"Our friends on the other side are practicing what could best be described as 'Thelma & Louise' economics," Senate Minority Leader Mitch McConnell, R-Ky., said.

"Let's just march the whole country right off the cliff and see how that works out," McConnell said, referring to the movie's memorable climax.

If the two sides don't compromise, a massive $600 billion in tax increases and spending cuts for 2013 would be triggered automatically in January -- the so-called fiscal cliff, which analysts say would jar the already weak economy.

Mostly following President Barack Obama's proposal, the Democratic bill would continue Bush-era tax cuts for everyone except individuals making at least $200,000 yearly and couples earning more than $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. That's an uncomfortable move for Democratic senators from farming and high-cost states.

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 46,700 estates projected to die 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 reductions for low- and middle-income families that Democrats want to extend.

These include the American opportunity tax credit, worth up to $2,500 to cover college expenses; language making the earned income tax credit more generous for large working families and some married working couples; and a boost in the tax refunds some families get under the child tax credit.

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.

Combined, those Democratic provisions would provide tax breaks averaging $1,000 to 25 million families, according to Treasury Department figures distributed by the White House.

Republicans also proposed bigger tax write-offs than Democrats did for small businesses taking deductions for the costs of buying some equipment.

Increase your money and finance knowledge from home

Goal Setting

Want to succeed? Then you need goals!

View Course »

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:


Jeb Bush advising Mitt Romney's vice-president choice as Rubio? For real? Why doesn't Jeb Bush go all the way and recommend his ex-business partner who is hiding in South America to evade the Justice Department subpoena for him to testify as to the nefarious business he and Jeb Bush were involved in? If he wants to have a friend or ex-partner as a contact close to the White House say so! Or is Rubio a "qualified" substitute? Why is it that those who are involved in the most shenanigans are favorites like Jeb Bush in the Republican Party? rcw/ocm

July 26 2012 at 1:19 PM Report abuse rate up rate down Reply

Whats the republican plan to help the poor and middle class people through these hard times that republicans (Bush) started with their need for war. You all know in your hearts Republicans don't have a plan, they don't and won't create lots of jobs ever, Republicans don't have a single idea even though they have the best tax deals, loopholes, profit taking deals out there. You blue collier hard working republicans are a perverted cult, you believe in trickle down effect, to democrate is like being pissed on... Republicans about to driving us off a cliff.( John Bonehead ) and his tea bagger friends. You just don't get it, it's your guys that are the BS masters. president Obama is a good man. can't wait until november

July 26 2012 at 10:10 AM Report abuse rate up rate down Reply
Robert Hill

I agree with the democratics on taxes. If you make more, you should pay more. The middle class needs a tax break.

July 26 2012 at 9:03 AM Report abuse rate up rate down Reply

10% of the top income earners pay 70% of the taxes while 44% pay no Federal taxes at all. If democrats want to raise taxes then it starts with the 44%....

Democrats have already screwed over the middle class and small business owners with OBamascare. All liberals policies are doing is creating as welfare state; they cater to the "poor" instead of helping them out of poverty.

17 million people added to the food stamp program since 2009? 3.6 million people file for "disability" immediately after their 3 years of unemplyment benefits run out?

The hard working middle class should have to tolerate this BS and come November we take away the democrats power to drain the economy by catering to the sponges....

July 26 2012 at 7:51 AM Report abuse rate up rate down Reply

ANyone notice how social program spending is skyrocketing while the unemploymeny rates were dropping and "private sector is doing fine?" How they won't allow an audit of the $80 Billion per year Food Stamp program

Democrats are fattening up the social program spending so when its must cut $650 Billion from the program they won't cut nearly as much as they should!

AT a minimum social program spending should be cut bacl to 2008 levels along with a complete audit of the programs; who illegally spent money on what! Close the loopholes that allow the social drains in this country (those who can work but refuse) to sponge off the hard working families.

Democrats are not getting more taxes to waste; no more slamming small businesses.....

July 26 2012 at 7:43 AM Report abuse rate up rate down Reply

I have grown to despise Mitch McConnell. I refuse to call him 'Senator.' Petty doesn't come close to describing his method of governance.

July 26 2012 at 2:03 AM Report abuse rate up rate down Reply
1 reply to Howdy's comment

LOL, right.... and Harry "DOA" Reid is a real gem....

July 26 2012 at 7:46 AM Report abuse rate up rate down Reply

The GOP doesn't get it, This country were marching off the cliff under the leadership of George W Bush. These super rich pigs are not investing money into the economy, they are not creating jobs with their money, but what they are doing is sending their money overseas, investing in China market and making it stronger. They are stock piling their money into swiss bank accounts. Taxing these scumbags would give a great service to our economy. Why shouldn't they pay their way?

July 26 2012 at 1:43 AM Report abuse +3 rate up rate down Reply
1 reply to andrewdfirst1's comment

While under OBama we went off a cliff, hit bottom and started to dig!

July 26 2012 at 7:45 AM Report abuse rate up rate down Reply

Tax cuts for the middle class is good & helps economy , but tax cuts for the rich is a waste of money
& just makes deficits bigger.

July 25 2012 at 11:26 PM Report abuse +4 rate up rate down Reply

Bottom line is this is a tax cut for the middle class. Why are the Republicans not allowing us to have a tax cut? So the rich are not in the tax cut. Why should Warren Buffet pay less in taxes then his secretary? How is that fair to millions of middle class people?

July 25 2012 at 11:18 PM Report abuse +5 rate up rate down Reply
1 reply to dxl504's comment
Patriot Crane

You can not tax the rich more.
The system is broken
The rich have tax lawyers & CPA's to thread the loop holes together.
Why do you think that Buffett & Gates give money away.
Because there really nice people ? If it were not deductable how much would they give ?
FLAT tax
You buy, you pay.
Picks up the illegals & foreigners living here.
You drive a Ferrari you pay more in taxes
You drive a Focus and you pay less

Word from the wise , your not going to beat them
Educate yourself and play the same game

July 26 2012 at 7:33 AM Report abuse rate up rate down Reply

The democrats passed the Tax rate bill and has sent it to the House. The I lost my wife and remarried VP Biden came over for Photo Op with Reid and the Democrats and grandstanding on the Bill.
Say Democrats you get 100 billion a year. The death tax is back folks, courtesy of the Reid/Pelosi/Reid/Obama bill that was passed by 51 to 48 today.
Now the businesses know the rates they will pay on any business they got in sales over $250,000 will be paying more in taxes, plus the 21 taxes plus from Reid/Pelosi healthcare bill.
Hex Hex Hex the people that will vote for Democrats!

July 25 2012 at 10:40 PM Report abuse -3 rate up rate down Reply