Outside the Beltway

Senate Rejects Democratic Plans On Tax Cut Extension

The Senate rejected an effort to limit the extension of the Bush tax cuts based on income level. At this point, the only question is when Democrats will concede defeat on this debate.

Doug Mataconis · Saturday, December 4, 2010 · 10 comments

Two proposals offered by Senate Democrats to extend the Bush tax cuts but limit the extension only to certain income levels were defeated today in the Senate:

United Senate Republicans joined a small handful of Democrats on Saturday to defeat a pair of proposals to extend some of the 2001 and 2003 tax cuts signed into law by President George W. Bush.

Voting nearly identically, the Senate twice failed to meet a 60-vote threshold necessary to move forward on both proposals. Meeting in a rare Saturday session after agreements fell through for a Friday vote, the results were widely expected. They were also somewhat premature, as the White House is still negotiating with congressional leaders on an alternative compromise proposal.

The first proposal by Finance Committee Chairman Max Baucus (D-Mont.) would have extended the cuts only for individuals with incomes of up to $200,000 and families with incomes of up to $250,000. That failed by a vote of 53-36, with all GOP senators in opposition as well as Democrats Russ Feingold (Wis.), Joe Manchin (W.V.), Ben Nelson (Neb.) and Jim Webb (Va.).

The second proposal by Sen. Charles Schumer (D-N.Y.) would have extended the 2001 and 2003 tax cuts permanently for incomes of up to $1 million, among other provisions such as a one-year extension of unemployment benefits and cuts in capital gains, estate and dividend taxes. That failed, 53-37, with Sen. Tom Harkin (D-Iowa) joining the ‘no’ votes.

President Obama, meanwhile, said he’s still confident that a deal on extending the tax cuts will be reached this year:

President Barack Obama said Saturday that he’s ready “to roll up my sleeves” and work with congressional leaders on a tax cut deal before rates are set to rise on Jan. 1.

The president said in remarks after commenting on a newly sealed free trade pact with South Korea that he wasn’t happy that Senate Republicans earlier Saturday blocked legislation that would have extended tax cuts for the middle-class permanently while letting tax cuts for the wealthy expire.

But Obama told reporters, “With so much at stake, today’s votes cannot be the end of the discussion.”

“We need to get this resolved and I’m confident we can do it,” he said. He said he’d work through the weekend and into next week to find a compromise.

Obama said lawmakers must give the American people “the peace of mind that their taxes will not go up” come the new year. He said that will require compromise by both sides.

Of course the reality of the situation is that all of the compromise so far has consisted of the President and Democrats moving closer and closer to the Republican position. When this debate started, Democrats were resisting any effort to extending the Bush tax cuts at all, then they moved to the position that they should be extended to anyone making less than $ 250,000/year, then that limit was raised by some Senators to one million dollars. Now, we’re at the point where either all of the tax cuts will be extended or none of them will:

The doomed votes mean Democrats may ultimately need to agree to a deal that runs contrary to their campaign promises over the past 10 years. Rather than eliminating the upper-end tax cuts, Democrats will likely cede to Republican demands to renew all of the Bush tax cuts for several years – a move that many in the party view as a major defeat.

President Barack Obama, appearing on camera shortly after the votes, said Congress needed to “resolve the impasse in the next few days.” Senate Majority Leader Harry Reid (D-Nev.) echoed the president on the Senate floor, saying he hopes to have a deal by later in the week.

“So we are going to continue to work on this issue through the weekend, into early next week,” Obama said. “And I’m going to be rolling up my sleeves with the leaders in both parties in Congress. We need to get this resolved, and I’m confident we can do it.”

But some Democrats vowed Saturday to hold the line against such a compromise. They even suggested that the issue may not be resolved before the tax cuts expire Dec. 31, which means paychecks would take a serious hit until Congress acts.

“We think this is right substantively, we think this is right politically and this is going to be one of the major issues as we go forward,” said Sen. Chuck Schumer (D-N.Y.), the No. 3 leader of the Democratic caucus. “We’re not giving up in three days, one week, two months, six months.”

The defiant stance, which has been embraced by the more liberal members of the caucus, sets up a showdown not only with Republicans, but also the White House. Obama has said Congress should protect the middle-class tax cuts, and his top advisers have suggested that would mean agreeing to renew all the tax cuts temporarily.

“In the past, when Democrats had these kinds of cases, we have sort of thrown up our hands,” Schumer said. “We’re not going to.”

So we may soon be at a point where it’s President Obama and the Senate Republicans v. the progressive wing of the Democratic Party. How’s that for triangulation ?