Tax Impacts

Huge Senate majority votes to advance $858B tax package

Posted on Tuesday, December 14, 2010



President Obama's $858 billion tax package won a huge bipartisan majority in the Senate Monday evening, setting it up for a contentious debate in the House.
In a 83-15 vote, the Senate quashed a filibuster by Sen. Bernie Sanders (I-Va.).
Fifteen lawmakers voted against it, including five Republicans: Sens. Tom Coburn (Okla.), Jim DeMint (S.C.), Jeff Sessions (Ala.), John Ensign (Nev.) and George Voinovich (Ohio).
Nine Democrats and one independent voted against the bill: Sens. Jeff Bingaman (N.M.), Sherrod Brown (Ohio), Russ Feingold (Wis.), Kirsten Gillibrand (N.Y.), Kay Hagan (N.C.), Frank Lautenberg (N.J.), Pat Leahy (Vt.), Carl Levin (Mich.), Mark Udall (Colo.) and Sanders.
“It makes no sense to me to provide huge tax breaks for millionaires and billionaires while we drive up the national debt that our children and grandchildren will have to pay," Sanders said in a statement after the vote.
Obama applauded the Senate's action to move his tax cut compromise with Republicans and urged the House to do the same quickly.
In a statement in the White House briefing room, Obama hailed the Senate's "strong bipartisan support" for the package and declared "this proves that both parties can in fact work together."
Retiring Sen. Chris Dodd (D-Conn.) said he voted for the package because he thought it unlikely they could win equally generous benefits for the unemployed next year, when Republicans will control the House.
“To sit their and watch this institution, the Congress, do great damage to the unemployed because we rejected a proposal I didn’t like but was a lot better than the one you’re going to get,” said Dodd. “I would have been upset with myself.”
A vote on final passage could happen as soon as Tuesday if opponents agree to waive the 30 hours that must elapse after a vote to end a filibuster.
Given Monday’s lopsided vote, the package is expected to win final passage easily, which one Democratic leadership aide predicted would “likely” happen on Wednesday.
Senate Majority Leader Harry Reid (D-Nev.) and Republican Leader Mitch McConnell (Ky.) were in the midst of negotiating an agreement to allow Democrats and Republicans to offer a few amendments to the package. A senior Democratic aide, however, said none of the amendments are expected to pass.
Senate action will send the package to the House, where Democrats will hold a caucus meeting Tuesday to discuss how to proceed, said a Democratic aide.
House Democrats could set up a self-executing rule that would bring the legislation to the floor with changes. In particular, Democratic leaders are looking at reworking the rates the Senate has set for the estate tax.
One option is to bring the package to the floor with language that would set the estate tax at its 2009 level: a 45-percent tax on individual inheritances over $3.5 million.
This path would send the bill back to the Senate to approve the changes but Republicans in the upper chamber would likely balk at a substantial revision to a core element of their agreement with President Obama.
McConnell warned that House Democrats would cause tax rates to go up across the board if they tampered with the bipartisan deal.
“We now urge the House leadership to bring this bipartisan agreement to a vote without political games or partisan changes designed only to block this bill’s passage in the House,” McConnell said in a statement. “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 January 1st.”
Dodd, however, said “if the House comes back with something different, and I hope they do, and we can do it, I’ll be one of the happiest members around here.”
Another option is to bring the Senate-passed bill to the floor and allow a vote on a House Democratic substitute. This would allow the House to pass the Senate bill unchanged and give liberal members political cover to vote for a substitute.
Obama said he understands members of both parties are "unhappy" with the compromise, but he said the package is "first and foremost" a "substantial victory" for middle-class families.
House Democrats have vocally opposed the package, which would extend for two years most of the Bush-era tax cuts, including income tax rates for even the nation’s wealthiest families. They are most disappointed with the decision to set the estate tax at 35 percent and apply it only to individual inheritances over $5 million.
The legislation would extend federal unemployment benefits for 13 months and cut the Social Security payroll tax by two percentage points, from 6.2 percent to 4.2 percent.
It includes a two-year fix of the Alternative Minimum Tax to protect an estimated 21 million households, many in wealthy communities in the Northeast, from higher taxes.
It would allow businesses to write up 100 percent of the cost of certain major investments in 2011.
It would extend a variety of business and energy tax incentives, such as the research and development tax credit, the ethanol tax credit, and grants for the solar and wind industries.
Sen. John McCain (R-Ariz.) and some taxpayers’ advocacy groups ripped some of the energy provisions. McCain called the ethanol provision the “Hawkeye Handout” because senators from corn states such as Sen. Tom Harkin (D-Iowa) supported the provision.
The ethanol tax credit would cost about $6 billion in 2011. Taxpayers for Common Sense noted the Government Accountability Office found the credit duplicative of the current renewable fuels standard.
Mike Lillis and Sam Youngman contributed to this report.
By Alexander Bolton - The Hill


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