CQ TODAY ONLINE NEWS
July 16, 2012 – 10:33 p.m.
Senate Democrats Circulate Draft Bill on Taxes
By Kerry Young and Sam Goldfarb, CQ Staff
Senate Democrats are digging in deeper in their campaign to return tax rates paid by high-income Americans to the levels of the 1990s, setting up a new round of election year votes on competing tax plans in coming weeks.
Democrats circulated among party members on Monday a draft bill that would spare most Americans from higher rates due to take effect Jan. 1. But the $272 billion proposal would allow the George W. Bush administration’s tax cuts to expire on annual household income greater than $250,000 and raise the rate on dividends and capital gains from the current 15 percent to 20 percent.
The draft Senate bill largely carries out a Democratic agenda outlined by President Obama in a July 9 speech, although it softens his proposed tax increase on dividends. Companies that rely on dividends to attract investors, such as electric utilities, had organized a campaign against returning to higher tax rates for these payments.
Obama had asked Congress to let the dividend rate return to 39.6 percent. In previous budgets, he had proposed 20 percent, which is what the Senate Democrats are proposing in the draft bill text.
The actual rate on dividends paid by people earning more than $250,000 would be 23.8 percent because of a 3.8 percent surtax on investment income imposed by the 2010 health care law (PL 111-148, PL 111-152).
For Democrats, the draft bill sets the party’s guideposts for the November elections and their terms for the post-election congressional session that will include new rounds of negotiations on the many large fiscal issues facing the country, including the broad array of expiring tax cuts and automatic spending reductions under sequester.
A top party leader,
“If we can’t get a good deal, a balanced deal that calls on the wealthy to pay their fair share, then I will absolutely continue this debate into 2013, rather than lock in a long-term deal this year that throws middle-class families under the bus,” Murray said.
The 2001 and 2003 tax cuts (PL 107-16, PL 108-27) that originated under Bush had been slated to expire at the end of 2010. Democrats that year also had pressed to allow higher rates to return for wealthier Americans but capitulated in the end and extended all the cuts for two years (PL 111-312).
This time around, Democrats are intent on portraying the Republicans as focused only on protecting the wealthy, and they are pushing hard to set up votes in which their GOP colleagues might be put into difficult positions regarding tax cuts.
Republicans in the Senate plan their own vote to extend all tax rates, and they jumped on Murray’s comments as a sign that the Democrats are holding out for what the GOP says will be a tax increase on small business.
“Last week, Senate Republicans proposed a legislative solution which ensured that no one sees their income taxes go up — no one — at the end of the year,” said Senate Minority Leader
“We could have passed this completely reasonable proposal last week and put the anxieties of millions of Americans at ease with a single vote. But Democrats refused. They’d rather keep the crisis unresolved, keep it looming out there on the horizon,” he said. “They think it gives them a political edge. They think it’s good politics. And they should be ashamed.”
Senate Democrats Circulate Draft Bill on Taxes
Competing Votes Planned
The GOP-majority House is planning its own vote this month extending all of the Bush administration’s tax cuts. But the votes in both chambers will be entirely symbolic since neither party in the Senate will be able to muster the 60 votes needed to move from debate to a direct vote on a tax bill.
Murray said the Senate will vote before the August recess on the Democrats’ tax bill that would preserve the current tax rates on household income under $250,000 and individual income under $200,000.
“I challenge them to do something different,” Murray said of Republicans, suggesting they offer an amendment to simply extend the current tax rates for those households earning more than $250,000 a year. “If they do this, all of the Bush tax cuts would be up for a clean, honest extension vote.”
In the House, Speaker
Boehner on Monday accused the Democrats of making threats that could “tank” the economy if “they don’t get a small-business tax hike,” while the House “will vote to stop all the tax hikes and lay the groundwork for a simpler, fairer tax code that closes loopholes.”
Boehner said lower rates would “keep more jobs here in America and actually bring jobs that have gone overseas — bring them back home.”
Even among the partisan barbs, however, there were deeper signs of how divided the parties remain and reminders of why they could not reach agreement last year.
In her speech, Murray criticized a plan she says was offered last year by a fellow member of the special congressional deficit-reduction panel,
Toomey issued a statement Monday that his plan would have “lowered all income tax rates by 20 percent” and that he was “disappointed in the gross mischaracterizations” about his plan. He noted Murray also chairs the Democratic Senatorial Campaign Committee. “Her priority is trying to win elections,” he said.