Preview: Senate Slated to Vote on Bush-Era Tax Cuts

On Wednesday afternoon, lawmakers in the Senate will cast votes on whether or not to extend the Bush-era tax cuts set to expire in January.

The essential difference between each party’s respective plan is fairly straight forward. Put simply, the Democratic proposal (which, incidentally, is supported by the president) seeks to extend the Bush-era tax cuts solely to lower and middle-income Americans. Republicans, on the other hand, want the Bush-era tax cuts extended to every income group, including those who earn more than $250,000 a year.

In a somewhat surprising maneuver, however, Senate Minority leader Mitch McConnell announced Wednesday morning he would allow back-to-back roll calls on both measures, further adding that each bill will only need a simple majority to pass. Why? McConnell explains:

Until now, the Senate had planned to vote only on the Democratic bill under rules requiring 60 votes to allow debate to proceed. Democrats would not be able to reach that number, but it is often easier for wavering lawmakers to vote for such a procedural motion than it is to vote for a bill on final passage.

"The only way to force people to take a stand is to make sure that today's votes truly count," McConnell said, adding, "Nobody on the other side can hide behind a procedural vote while leaving their views on the actual bill itself a mystery to the people who sent them here."

While the outcome today will be almost entirely symbolic (even if the Democrat bill passes the Senate, for example, it will languish in the Republican-controlled House), Minority Leader McConnell’s decision forcing two separate votes could pose significant problems for vulnerable Senate Democrats facing reelection in November:

It also raises the stakes for some Democratic senators in close re-election races. The Democratic measure includes items like a sharply higher tax on inherited estates, which could be an issue in states with a high cost of living or with many farms and ranches.

"A vote for the Democrat plan is a vote to put these farms and ranches out of business," McConnell said.

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Even so, the chances either measure will pass is unlikely (although Sen. Chuck Schumer seems to think otherwise). Indeed, Sens. Joseph Lieberman and Jim Webb -- independents who typically caucus with the Democrats -- have already said publicly they will vote against the Democratic bill.  In other words, every single Democrat would need to vote for the measure to secure its passage. And, of course, since there are only 47 Republicans in the Senate, it’s improbable GOP lawmakers will garner the requisite 51 votes.

In any case, here are a few salient differences between the two bills.

The $250 billion Democratic bill would renew through 2013 a slew of cuts in income tax rates and other levies that were first enacted during the last decade but would expire Jan. 1 without congressional action.

But Democrats drew the line for individuals earning over $200,000 and couples making at least $250,000. Their top rates would revert from 33 percent and 35 percent, respectively, today to 36 percent and 39.6 percent in January.

Democrats argue that the well-off should contribute to efforts to contain federal deficits, while Republicans say many of those affected own businesses and would have a harder time hiring workers. The increase would affect 2.5 million households, or 2 percent of all 140.5 million tax returns, according to 2009 Internal Revenue Service statistics.

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.

Stay tuned for updates.

Update - The Senate has rejected the Republican proposal to extend the Bush-era tax cuts for all income earners:

The Senate has rejected a Republican measure renewing tax cuts for everyone next year, including the nation's highest earners.

The partisan 54-45 vote Wednesday came during a campaign season battle between the two parties over wideranging tax cuts that will expire in January without congressional action. Senators will vote shortly on a Democratic version that would deny the tax reductions in 2013 to individuals making over $200,000 yearly and couples earning at least $250,000.

Update II - The Senate has approved the Democratic plan to extend the Bush-era tax cuts:

The Senate voted 51-48 today to extend some of the Bush tax cuts, affecting 98 percent of all American taxpayers, for another year. The extended tax cuts would affect citizens making up to $250,000 a year, with the Senate not voting to extend cuts for the 2 percent of Americans making over that amount.

 

Earlier this month, President Obama called on Congress to extend tax cuts on the bottom 98 percent of earners, while letting those cuts affecting the rich expire. The Republican Party's official position is that all the tax cuts should be extended, though Senate Republicans opted not to filibuster a bill that would only extend some of them. Nonetheless, the legislation is expected to fail in the House, where the Republicans hold the majority.