|"Only dull people are brilliant at breakfast"
|"The liberal soul shall be made fat, and he that watereth, shall be watered also himself."
-- Proverbs 11:25
Senate Republicans will press this week to extend tax cuts for affluent families scheduled to expire Jan. 1, but the same Republican tax plan would allow a series of tax cuts for the working poor and the middle class to end next year.
Republicans say the tax breaks for lower-income families - passed with little notice in the extensive 2009 economic stimulus law - were always supposed to be temporary. But President Obama had made them a priority in 2009 and demanded their extension in 2010 as a price for extending the Bush-era tax cuts for two years, and both the White House and Senate Democrats are determined to extend them again.
That sets up a potentially tricky issue for Republicans. They have said they do not want taxes to go up on anyone while the economy struggles to gain altitude, but under their plan, written by Senator Orrin G. Hatch of Utah, the senior Republican on the Finance Committee, about 13 million families would see their tax refunds reduced, and some would see their taxes increase.
"Senator Hatch's amendment would extend tax breaks for the top 2 percent of Americans," Senator Harry Reid of Nevada, who leads the Senate's Democratic majority, said this month. "But it fails to extend a number of tax cuts that help middle-class families get by in a tough economy."
The tax showdown is set for Wednesday, when the Senate will vote on whether to take up Democratic legislation to extend Bush-era middle-class tax cuts through 2013. The motion will need 60 votes to pass, and only if it gets those votes will Republicans be given a chance to vote on their alternative tax plan. The House will vote next week on a similar Republican plan that also allows the 2009 stimulus cuts to lapse.
"The president said if you pass the stimulus, unemployment would never go above 8 percent," said Representative Kevin McCarthy of California, the No. 3 House Republican. "We've had a 41-month experience that that is not true and hasn't been effective. One thing Republicans have always said is that they want a form of accountability."
Under the Democratic plan, tax rates on earnings over $250,000 would snap back to 36 percent and 39.6 percent, the rates paid during the Clinton presidency, from 33 percent and 35 percent. It would also allow the estate tax rate to jump to 55 percent on the value of inheritances over $1 million per individual, $2 million per couple. The current rate is 35 percent on estates over $5 million, $10 million a couple.
The Senate Democratic plan for the estate tax actually takes a bigger piece of qualifying estates than the proposal by President Obama, who wanted a 45 percent rate on inheritances of about $3.5 million, or $7 million per couple. It could cause as many political headaches for some moderate Democrats as the income tax expirations.
Between the income tax expirations, the estate tax provision and a business investment provision that Democrats would limit to small businesses, the Democratic plan would raise almost $82 billion more in taxes in 2013 than the Republican version. But the Democrats' claim to fiscal prudence may be undermined by their decision to maintain the stimulus law's tax breaks, which would cut those savings down to $55 billion. Republican tax aides say the vast majority of the benefits Democrats are seeking to preserve are not tax cuts but checks written by the Internal Revenue Service and sent to the working poor. Given the huge increase in government aid, like food stamps and unemployment benefits, letting some assistance lapse makes sense, they say.