Senate Democrats Weigh Vote Plans on Extending Bush Cuts

Democrats in the U.S. Senate are considering whether they should vote before the November election on extending income tax cuts that expire at the end of 2012.

Senators have differing views on the timing, said Charles Schumer of New York, the third-ranking Democrat.

“I don’t know,” Schumer told reporters yesterday in Washington. “Everyone’s thinking about this issue and we’ll have to wait and see what happens.”

Senate Democrats, who are eager to schedule repeated votes on the Buffett rule proposal that would set a minimum tax rate for top earners, have a more complicated set of political calculations on broader tax policy. Voting before the election carries political risks -- as does not voting.

The Buffett rule, named for billionaire investor Warren Buffett, would impose a minimum 30 percent federal tax rate on households making more than $2 million a year. Republicans on April 16 blocked the bill from advancing in the Senate.

Democrats hold a 53-47 Senate majority, giving them control of the calendar. Republicans can block most legislation, which in the Senate requires 60 votes to overcome procedural hurdles.

If Congress doesn’t act by the end of the year, income tax rates in 2013 would return to levels set before the 2001 and 2003 tax cuts took effect during President George W. Bush’s administration. The top rate would increase to 39.6 percent from 35 percent, the child tax credit would shrink, capital gains rates would rise to 20 percent from 15 percent and the estate tax would affect more families.

Higher Taxes

Eighty-three percent of U.S. households would pay higher taxes, with the increase averaging $3,701 a year, according to the Tax Policy Center, a nonpartisan research group in Washington.

Most Democrats, including President Barack Obama, want to extend the tax cuts for almost all taxpayers. Obama would allow the tax cuts to expire for married couples earning at least $250,000 a year and individuals making at least $200,000.

In 2010, when Democrats controlled the House and Senate, they decided not to hold votes before the election. Afterward, though control of the House didn’t shift to Republicans until the start of 2011, Democrats agreed to extend all of the tax cuts for two years.

Senator Mark Begich, an Alaska Democrat, said the Senate should wait to vote on the tax cuts until the lame-duck session after the election, when some defeated or retiring members will still be in office and automatic budget cuts will be set to take effect as well.

Tough Calls

“We’ll have to face all the issues: the budgets, the tax issues, the automatic cuts, all that stuff,” he said in an interview. “That’s a good time to put it all on the table. People are going to have to make some tough calls.”

Senator Ben Cardin, a Maryland Democrat, said Democrats shouldn’t wait for six months to take up the issue when they have a chance to lead now.

“I want to get as much done before November as possible,” he said in an interview. “The lame duck is always unpredictable. You just don’t know. If one side believes that they won in the elections, they’re going to hold out for better than they would have gotten during the normal year.”

‘Context of the Reality’

The decisions will be made “in the context of the reality of the end of the year,” said Senator Richard Durbin of Illinois, the second-ranking Democrat.

“Unless there is some intervening event, some external event, I think the reality is we are not going to take up tough issues involving spending, taxes, Medicare, Social Security before an election,” Durbin said on Bloomberg Television yesterday.

The Senate Democrats’ decision mirrors the debate among House Republicans on whether to schedule tax votes this year.

House Republicans held two closed-door, small-group planning sessions this week, said Representative Pat Tiberi, an Ohio Republican who is helping lead the decision-making.

Tiberi said in an interview that he and other members of the tax-writing Ways and Means Committee are trying to bring the rest of the Republicans up to date on the list of tax issues.

Besides the expiring income tax cuts, dozens of tax breaks ended last December, including the research and development tax credit. The 2 percentage-point cut in the payroll tax is set to end Dec. 31, along with an expanded tuition tax credit that began with the 2009 stimulus law.

Republicans are trying to build support for an overhaul of the U.S. tax code that would lower marginal rates and remove tax breaks.

“It’s going to take time to get everyone going in the same direction,” said Representative Charles Boustany, a Louisiana Republican on the Ways and Means panel, in an interview. “We really need everybody to stick together on this.”

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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