WASHINGTON — Democrats pushed a yearlong extension of tax cuts for all but the highest-earning Americans through the Senate on Wednesday, giving Democrats a significant political victory on a measure that is fated to go no further in Congress.
Senators approved the Democratic bill by a near party-line 51-48 vote, with Vice President Joe Biden presiding over the chamber in case his vote was needed to break a tie. Minutes earlier, lawmakers voted 54-45 to kill a rival Republican package.
The $250 billion Democratic measure would extend tax cuts in 2013 for millions of Americans that otherwise would expire in January. But it would deny those reductions to individuals making over $200,000 yearly and couples earning at least $250,000.
With control of the White House and Congress at stake in elections less than four months off, passage of the Democratic bill aligned the Senate with the tax-cutting vision of President Barack Obama. Obama has made tax fairness — which includes tax increases on the rich — an overarching theme of his re-election campaign, and rejection of the measure would have been an embarrassment for the president and Senate Democrats.
The vote also served as a counterpoint to the GOP-run House, which next week will approve tax cuts nearly identical to the $405 billion Republican plan the Senate rejected Wednesday.
“With the Senate’s vote, the House Republicans are now the only people left in Washington holding hostage the middle-class tax cuts for 98 percent of Americans and nearly every small business owner,” Obama said in a written statement after the vote.
House Speaker John Boehner, R-Ohio, restated his plan for next week’s House, citing the Democratic measure’s tax boosts on higher earners. Republicans say those increases sap money from business owners who would otherwise create jobs, which Democrats say is 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 written statement.
Wednesday’s Senate vote also highlighted how both parties see the tax issue as a winning one: Democrats because they think it makes the GOP look like defenders of the rich, Republicans because they think it shows Democrats don’t care about businesses.
It took just minutes for Democratic Senate campaign officials to send emails saying that Sen. Dean Heller, R-Nev., was “holding tax relief for the middle-class hostage by demanding more millionaire tax breaks.” GOP Senate campaign operatives sent out similar e-mails, with one saying Sen. Jon Tester, D-Mont., had voted to “raise taxes on Montana farmers, ranchers & small business owners.”
Tester and Heller are in tight re-election contests this November.
Two senators who will retire next year — Jim Webb, D-Va., and Joe Lieberman, a Connecticut independent who usually votes with Democrats — were that party’s only defectors on final passage.
Opposing the GOP measure were Sen. Scott Brown, R-Mass., who faces a tough re-election fight in November, and Sen. Susan Collins, R-Maine. Sen. Mark Pryor, D-Ark., who could have a tight re-election in 2014, voted for both the Republican and Democratic plans.
“Thank goodness it’s not going anywhere because it would be bad for the economy, the single worst thing we could do to the country,” Senate Minority Leader Mitch McConnell, R-Ky., said.
Republicans were hoping that several Democrats seeking re-election would hurt their candidacies by having backed the Democratic package. The bill would dramatically boost the estate tax, which would be widely unpopular in farming, ranching and high cost-of-living states, and increase levies on dividends and capital gains, which are relied on by many elderly people.
“That’s what today’s votes are all about,” McConnell said in a thinly veiled warning to Democrats. “Showing the people who sent us here where we stand.”
Illustrating that, Sen. Claire McCaskill, D-Mo., who is in a tight 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 go much higher in 2013.
Comparison of plans
A comparison of Democratic and Republican bills to extend expiring tax cuts through 2013:
• Alternative minimum tax: Democrats would prevent millions of middle-class families from having to pay the alternative minimum tax for another year, shielding them from higher levies originally meant to prevent the rich from escaping taxes. Republicans would extend those protections for two years.
• Business tax write-offs: Under section 179 of the tax law, Democrats would let small businesses deduct 100 percent of their expenses for some equipment purchases next year up to $250,000. The deduction would phase out for companies earning at least $800,000. Republicans would raise the amount of purchases to a top of $500,000, with the deduction phasing out for companies making at least $2 million.
•Income-support programs: Democrats would continue the American opportunity tax credit of up to $2,500 for college costs. They would also renew language making the earned income tax credit more generous for large working families and some married working couples, and other language boosting the tax refunds some families get under the child tax credit. Republicans would eliminate all of those extensions.
• Capital gains: The top rate for capital gains is 15 percent, which would rise to 20 percent if the tax cuts expire. Republicans would impose a top rate of 15 percent next year, Democrats 20 percent.
• Dividends: Dividends are currently taxed at a top rate of 15 percent. When the tax cuts expire next year, they would be taxed like regular income, at whatever rate a taxpayer faces. Republicans would continue the top rate at 15 percent next year, Democrats at 20 percent.
• Estate tax: Republicans would continue today’s top 35 percent rate on inherited estates, with an exemption for the first $5.12 million in the estate’s value. Democrats would let that expire, leaving in its place a top rate of 55 percent and an exemption for the first $1 million.
•Income tax rates: Republicans would extend the current rates of 10, 15, 25, 28, 33 and 35 percent for another year. Democrats would do the same, but not for individuals earning more than $200,000 annually and couples making $250,000. Those households, who now pay top rates of 33 or 35 percent, would instead pay up to 36 or 39.6 percent. Democrats would limit itemized deductions and phase out the personal exemption that can be claimed by those highest-earning households; Republicans would not.
The Associated Press
