WASHINGTON—The U.S. Senate on Saturday defeated two attempts by Democrats to extend the Bush-era tax cuts for the middle class permanently. After the Senate votes, President Barack Obama told Democratic congressional leaders he would be open to a temporary extension of the Bush-era tax cuts for the affluent, but he would demand concessions from the GOP.
White House officials and congressional Republicans were closing in on a deal that would extend current income tax rates for all Americans as well as a benefits program for the long-term unemployed. Video courtesy of Fox News.
In rare weekend votes that likely had little effect on wider negotiations to reach a compromise about extending the tax cuts, the Senate voted 53-36 to reject an attempt to initiate debate in the chamber on a measure that would have extended lower tax rates for individuals who earn less than $200,000 and couples earning less than $250,000.
The measure would have also renewed the estate tax from 2011 at the same level it was set at in 2009 before it expired at the end of that year. It would levy a 45% tax on estates valued at than $3.5 million. Without congressional action, the estate tax will be reinstated in 2011 at a 55% level on estates in excess of $1 million.
Jonathan Ernst/Reuters
Senate Minority Leader Mitch McConnell (R., Ky.) said that he didn't think American people wanted to head into 2011 with continuing uncertainty about what their tax rates would be.
Republicans unanimously opposed both votes, and some Democratic lawmakers joined with them by voting against the majority.Senate lawmakers then defeated a separate attempt by a vote of 53-37 to raise the threshold for middle-class tax cuts to $1 million and then extend that tax level permanently.
In both votes, five Democratic or independent lawmakers voted with the Republicans, although it was different lawmakers in each case.
Under Senate rules, the motions would have required 60 votes in order to formally bring the bills to the floor.
President Obama called the votes "very disappointing" and said the issue of the tax cut renewal needed to be resolved shortly.
How the Senate Voted
See how each senator voted; compare with 2001 and 2003 votes, when the tax cuts were enacted.
In saying he would be open to a temporary extension of the Bush-era tax cuts for the affluent, President Obama told Congressional leaders he would seek GOP concessions: a year-long extension of unemployment insurance and tax cuts for middle-income and working poor Americans that were in the stimulus law but also expire at the end of this year. Those include the Making Work Pay tax cut of $400 for middle-income individuals and $800 for couples, a tuition tax credit, an expanded earned income and child credit for the working poor, and a payroll tax credit for new hires.
That package would cost the Treasury around $150 billion a year. But without it, taxes would still rise for 95 percent of Americans, a White House official said.
House lawmakers approved legislation permanently extending the lower tax cuts for middle class Americans on Thursday.
The tax cuts implemented in 2001 and 2003 by the Bush administration are set to expire at the end of the year unless they are renewed by Congress.
Harry Hamburg/Associated Press
Senate Majority Leader Harry Reid (D., Nev.) and Majority Whip Richard Durbin (D., Ill.) spoke outside the Senate Chamber Saturday.
Democrats castigated Republicans, saying that in the first opportunity in the Senate to pass a measure extending the Bush tax cuts for most Americans, the GOP decided to vote against such legislation.
Sen. Mark Begich (D., Alaska) said that only around 315,000 Americans earned more than $1 million a year, saying that Republicans had chosen to defend those wealthier people at the expense of the rest of the country.
Before the November midterm elections, Democrats pushed just for the renewal of lower tax rates for people earning less than $200,000—what they termed middle-class Americans.
After the drubbing they received, Obama and congressional Democratic leaders made it clear they would be open to an agreement that saw all the tax cuts renewed at least temporarily.
Republicans have argued throughout that with the weak economic conditions, it would be a mistake to raise taxes for anyone.
Talks continue between congressional lawmakers and top administration officials about what would be the exact constructs of a bipartisan deal.
Senate Majority Leader Harry Reid (D., Nev.) said on the Senate floor that he hoped there would be an agreement by midweek.
His counterpart, Minority Leader Mitch McConnell (R., Ky.) said that he didn't think American people wanted to head into 2011 with continuing uncertainty about what their tax rates would be, implying that a deal would be reached by the end of the year.
The broad outlines of the compromise that are taking shape appear to include a two-year extension of all the Bush tax cuts. Democrats are pushing strongly for the inclusion of a year-long extension of federal jobless benefits that expired at the end of November as well as the renewal of a raft of other tax measures aimed at the middle class.
Sen. Reid said that he intended to hold several unrelated votes on the Senate floor Wednesday. These would include legislation renewing a compensation fund for victims of the terrorist attacks on Sept. 11, 2001, and rescue workers at Ground Zero, a measure allowing a collective-bargaining agreement for firefighters, a $250 cost-of-living payment to senior citizens and legislation paving the way for children of illegal immigrants to gain citizenship.
—Jonathan Weismancontributed to this article.
Write to Corey Boles at corey.boles@dowjones.com
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