The U.S. Senate isn’t likely to vote on extending the Bush-era tax cuts before leaving to campaign for the November elections, two senators said.
“I see the value of a vote, but given the short time-frame, it may be difficult,” second-ranking Democrat Dick Durbin of Illinois said today in Washington. He said the House may adjourn as early as next week, making it unlikely Congress could finish action.
Iowa Democrat Tom Harkin said he also doubted the Senate will vote on tax cuts before the election. There isn’t enough time left to work out an agreement on how to proceed, he said.
“The clock’s running out,” Harkin said. “There’s just no way that we can get anything done on this before then because of Republican intransigence on this issue.”
Unless Congress acts by the end of the year, all tax cuts enacted in 2001 and 2003 will expire Dec. 31, triggering higher rates on income and investment earnings for all taxpayers.
With elections to determine control of Congress less than six weeks away, Republicans and Democrats are heading for a confrontation about the future of the cuts.
Both parties want to extend them for individual income up to $200,000 and up to $250,000 for couples filing jointly. That covers about 97 percent of all taxpayers, according to data from the U.S. Internal Revenue Service. Republicans want to keep the cuts for those in the higher income brackets, which President Barack Obama opposes.
Obama called it “irresponsible” for Congress to extend tax cuts for the wealthiest Americans because it would cost $700 billion in government revenue when lawmakers are looking to rein in deficits.
“I can’t give tax cuts to the top 2 percent of Americans” and “lower the deficit at the same time,” he said Sept. 20 during a town hall discussion on jobs and the economy on CNBC television.
Even if lawmakers decide not to let tax rates rise, Americans’ paychecks may shrink temporarily if Congress doesn’t act soon.
If Congress doesn’t vote in November, the IRS will advise employers to increase deductions from paychecks beginning Jan. 1, according to payroll experts. That’s because the IRS needs time to prepare and distribute tables used to calculate withholding taxes, and employers need time to implement them.
Alec Phillips, an economist at Goldman Sachs Group Inc., said in a research note yesterday that even a temporary failure by Congress to extend Bush-era tax cuts may erase U.S. economic growth in the first half of next year.
Gross domestic product would be cut by almost 2 percentage points if Congress doesn’t extend the tax cuts as well as temporary tax credits under the 2009 stimulus bill and relief from the alternative minimum tax, Phillips calculated.
Even a temporary lapse in the tax provisions “would essentially wipe out most of the modest growth we expect in the first half of 2011,” Phillips wrote in the research note. He said in a phone interview that a higher tax rate in the first two months of the year would have that effect.
Dozens of House Democrats and at least five in the Senate say they would prefer to extend the tax cuts for everyone for at least one or two years. House Republicans today announced a governing agenda that includes extending all of the Bush tax cuts.