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July 11, 2012 – 11:09 p.m.

Senate Moves Closer to Tax Votes

By Sam Goldfarb, CQ Staff

Congressional leaders have staked out their positions on expiring tax cuts and are now deep into an election year debate that offers potential benefits and risks to both parties.

In the Senate, much of Wednesday was spent figuring out when to vote on President Obama’s proposed one-year extension of 2001 and 2003 tax cuts (PL 107-16, PL 108-27) on household income below $250,000.

Majority Leader Harry Reid, D-Nev., first passed on a chance — presented by Minority Leader Mitch McConnell, R-Ky. — to vote on Obama’s plan, along with a GOP alternative that would preserve current rates on all income levels for another 12 months. But, after a meeting with Democratic leaders and Obama at the White House, Reid moved to vote on the competing plans Thursday, and it was McConnell’s turn to decline the offer.

The intricate dance between the leaders appeared half-choreographed, half-improvised, as the two sides angled to make the best of a situation that could lead to significantly higher taxes for a majority of earners if Congress does not act by Jan. 1.

Officially, the Senate this week is considering a Democratic measure (S 2237) that would cut taxes for businesses that hire new workers. But that bill has essentially been turned into a platform for a larger battle about whether to raise taxes on the wealthy.

By Wednesday evening, it seemed likely that the Senate would vote next week on the tax cut extensions, perhaps as an amendment to a tax measure (S 3364) that would reward multinational businesses for investing in their domestic operations.

“It’s clear that Reid wants these votes now,” a GOP aide said.

At the outset of a topsy-turvy day, McConnell moved for an immediate vote on the tax cut extension that Obama unveiled earlier in the week. He also proposed that the Senate vote on an amendment offered by Sen. Orrin G. Hatch, R-Utah, to extend all of the tax cuts for a year.

“My recommendation is, we give the president what he asked for,” McConnell said in his opening remarks Wednesday. “It’s a vote the president’s asking for. It’s a vote I just asked for.”

Reid rejected McConnell’s offer, however, arguing that the amendments had nothing to do with the topic at hand.

Victories for Both Parties

After several rounds of sparring, both leaders had reason to be satisfied. McConnell could claim that Democrats were afraid to vote on their own policies. Blocked from offering amendments, Republicans came away with a reason to vote against the underlying legislation and prevent Democrats from gaining a political victory with a tax break for small businesses.

For his part, Reid could say Republicans were obstructing a tax cut and undermining small businesses.

Senate Moves Closer to Tax Votes

Later in the day, Reid returned to the floor with a new strategy. Votes on the Obama and Hatch proposals would be stand-alone measures, unconnected to the hiring tax credit. Reid offered to hold these as simple majority votes. But McConnell promptly objected to Reid’s offer on the grounds that the majority leader failed to provide the president’s proposal as legislative text.

Reid’s proposal would most likely have set up a path to pass the extension of the expiring tax rates for the lower-income levels, but a senior Republican aide was quick to point out that the agreement floated by Reid did not establish a timeline for the votes.

When not engaged in procedural maneuvering, Reid and McConnell took turns debating the substance of their respective proposals.

McConnell argued that the president’s policy would hurt small businesses whose profits are taxed as the personal income of their owners.

Reid said Republicans were protecting the wealthy at the expense of the middle class. And he managed to take a few jabs at Mitt Romney, the presumed GOP presidential nominee for president, who has taken heat for not disclosing more information about his offshore investments.

“We’ll get to the tax issues,” Reid said in the morning. “We’ll be able to talk more in detail about Gov. Romney’s taxes, but right now before this body is a small-business jobs bill.”

Focus on Small Business

Meanwhile, Reid on Wednesday evening filed for cloture on the hiring tax credit and a substitute amendment offered by Mary L. Landrieu, D-La., that would offer several more benefits for small businesses. The move set up Friday votes on the two measures, unless an agreement can be reached to vote on Thursday.

Apart from offering employers a credit worth up to $500,000 for expanding their payrolls, the underlying Democratic bill would allow firms to deduct the full cost of equipment purchased this year.

Republicans, who typically support business tax cuts, confirmed that they would block further debate on the bill because they were being prevented from offering certain amendments.

“I’m not going to agree to move forward on legislation that I had no ability to influence whatsoever,” said Sen. Marco Rubio.

The Florida Republican also dismissed the tax cut measure as “messaging ploy,” noting that it has no chance of becoming law because of a constitutional requirement that tax bills originate in the House.

But there is no limitation on where debates and political messaging on taxes can begin, and lawmakers from both parties will in coming weeks try to use the looming expiration of tax cuts to their advantage and try to undermine the arguments of their opponents.

Senate Moves Closer to Tax Votes

Democratic leaders may have a somewhat more challenging task than their Republican counterparts because some conservative Democrats may cross the aisle and vote to continue current rates for all taxpayers.

However, after the White House meeting, the Senate’s No. 2 Democrat, Richard J. Durbin of Illinois, said only a few Democrats, if any, would vote to extend all of the Bush tax cuts.

Alan K. Ota and Steven T. Dennis contributed to this story.

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