WASHINGTON – The U.S. Senate passed an $858 billion tax-cut plan, giving bipartisan endorsement to an agreement crafted by President Barack Obama and Republicans that extends Bush-era reductions for all income levels.
The 81-19 vote sends the bill to the House, where Democratic leaders may bring it to the floor as early as Wednesday. House Democrats are planning a separate vote on limiting estate-tax breaks in the bill, House Rules Committee Chairwoman Louise Slaughter of New York said Wednesday. Approval of the change could force further Senate action.
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Many Senate Democrats voted for the package, though they had advanced a version that would prevent tax-cut extensions for high-income taxpayers. Republicans on Dec. 4 blocked that version from moving forward to a vote.
Three amendments were rejected Wednesday in separate votes before the Senate moved to final passage of the bill.
“Whether you agree with all the contents of the bill or not, everyone should understand that this is one of the major accomplishments of any Congress, where two parties, ideologically divided, have agreed on a major issue for the American people,” said Senate Majority Leader Harry Reid of Nevada.
Other Democrats opposed the bill, objecting to the inclusion of tax cuts for high-income individuals and the lowest estate tax in 80 years, apart from this year when the levy was temporarily erased.
Democrats Voting No
Democrats who voted against the measure included Senators Mark Udall of Colorado, Carl Levin of Michigan, Patrick Leahy of Vermont, Kirsten Gillibrand of New York, Russell Feingold of Wisconsin, and Richard Durbin of Illinois. Republicans voting against the measure included Senators Jim DeMint of South Carolina and John Ensign of Nevada.
Obama urged lawmakers on Wednesday to “pass these tax cuts as swiftly as possible.” He said at the White House that the bill, “while not perfect, will help grow our economy and create jobs in the private sector,” adding that lawmakers “can’t afford to let it fall victim to either delay or defeat.”
The bill extends through 2012 all of the tax cuts on income, capital gains and dividends that were enacted in 2001 and 2003 and are scheduled to expire at the end of the month. It also extends expanded unemployment insurance benefits through 2011, cuts payroll taxes by 2 percentage points during 2011 and lets businesses write off 100 percent of capital investments between Sept. 9, 2010, and Dec. 31, 2011.
Expired Tax Breaks
The legislation extends dozens of expired and expiring tax breaks, including the research and development tax credit and a college tuition tax credit that was created in last year’s stimulus law. It sets a $5 million per-person exemption from the estate tax and a 35 percent top rate through 2012, down from the $1 million exemption and 55 percent top rate that would take effect if no law passes this year.
House Democrats expressed particular frustration with the estate tax provision, saying it provided a giveaway to the nation’s wealthiest families. According to the Tax Policy Center, the bill would exempt an estimated 2,860 estates in 2011 from any tax. Democrats favor a 45 percent rate on estates worth more than $3.5 million, an estimated 3,600 estates in 2011.
Many House Democrats have announced their support for the bill, and some who oppose the agreement acknowledge that they are likely to lose. Leaders are discussing allowing an estate tax vote that could be defeated by a coalition of Republicans and Democrats who want to support the compromise bill.
‘Fast-Moving Train’
“It’s a fast-moving train and there’s a business-as-usual quality here,” Representative Peter Welch, D-Vt., said on Bloomberg Television Wednesday.
Republicans warned that any significant changes made by the House would be rejected in the Senate and would risk scuttling the entire agreement.
“If the House Democratic leadership decides to make partisan changes, they will ensure that every American taxpayer will see a job-killing tax hike on Jan. 1,” Senate Minority Leader Mitch McConnell, R-Ky., said in a statement.
If the tax cuts expire, payroll withholding would increase in January, taking more money out of workers’ paychecks and causing administrative challenges for the Internal Revenue Service. The 112th Congress would take up the tax issue, and the outcome would be controlled by a Republican-led House and a Senate with 47 Republicans, up from the 42 now.
Senate Democrats, who voted in large numbers to cut off debate on Dec. 13, said they agreed to move forward though the bill extended tax cuts for high-income taxpayers.
“The fact is this bill will be a help to the middle class,” said California Democrat Barbara Boxer.
Senate Republicans, who prefer a permanent extension of all existing tax rates, said they were willing to negotiate with Obama even if they didn’t get everything they wanted.
