Senate Democrats plan to move ahead with a bipartisan tax package, despite strong objections from House Democrats.
Senate Majority Leader Harry Reid (D-Nev.) unveiled a bill Thursday evening that keeps the deal between President Obama and Senate Republican Leader Mitch McConnell (Ky.) largely unchanged, but includes environmental provisions that may soothe angry liberals.
To win over wavering liberals, Reid has added an ethanol tax credit, which Sen. Tom Harkin (D-Iowa) supports, and an extension of the Section 1603 cash grant program for the renewable energy industry, which Sen. Sherrod Brown (D-Ohio) favors.
White House press secretary Robert Gibbs welcomed the news. He told reporters Friday that the provisions were "important" and supported by the White House.
Arizona Sen. John McCain (R) in a message on Twitter said he had "serious concerns" about the package, though he said he planned to support it. He said the goal of the package should be to prevent tax hikes, and not to help special interests.
The package includes other green-energy incentives that could win support among House liberals, who are disappointed the Senate failed to take up a comprehensive energy reform and climate bill this year. They include tax credits for biodiesel and renewable diesel; energy-efficient homes; alternative fuels; and a 30-percent investment tax credit for alternative vehicle refueling properties.
But the renewable energy tax provisions have failed to appease a group of Senate Democrats who don’t want to extend tax cuts for families earning over $1 million.
Brown and seven other Democratic senators have asked Reid for a vote on an amendment that would restore Clinton-era tax rates on millionaires and direct the resulting revenue to the Social Security trust fund.
“We ask that you ensure an opportunity for the Senate to vote on an amendment that will give the American people a clear choice whether they would prefer to give bonus tax cuts to the very wealthiest among us, as the package currently proposes, or to use these resources to strengthen Social Security,” the lawmakers wrote.
Sens. Jeff Merkley (Ore.) and Mary Landrieu (La.) circulated the letter, which received the signatures of Brown and Sens. Mark Begich (D-Alaska), Daniel Akaka (Hawaii), Al Franken (Minn.), Mark Udall (Colo.) and Barbara Boxer (Calif.).
Merkley noted in a press release that the “Obama tax cut proposal” gives families earning between $40,000, and $50,000 an average tax break of $1,679 compared to a cut of nearly $140,000 for families earning over $1 million.
Environmentalists and renewable energy trade groups applauded the extension of the grant program for renewable energy projects.
In a statement Thursday night, American Wind Energy Association CEO Denise Bode called extension of the grant program a “great day for American workers.”
“We have a lot of work to do to ensure that this victory is upheld in the House and Senate, and signed by the president, but we saw an outpouring of support this week that was truly inspiring,” she said.
The bill also includes an increase in tax relief for mass transit, an extension of tax benefits for property owners who set aside land for conservation, and a special tax deduction for elementary and secondary school teachers.
House Democrats voted during a closed-door caucus meeting on Thursday
to oppose the package unless it included substantial revisions.
The legislation would still extend for two years almost all of the tax cuts
passed in 2001 and 2003 under former President George W. Bush. It would
also keep intact what liberals see as the most deplorable element of the
deal — an estate tax set at 35 percent that applies only to
inheritances over $5 million.
It also extends federal unemployment benefits for 13 months, despite calls from liberals to extend the assistance for two years to mirror the extension of the Bush tax cuts.
Senate aides estimate the total cost of the package at about $850 billion over two years.
House Democrats have mulled replacing the pending estate tax provision with an alternative that would tax inheritances over $3.5 million at 45 percent, and sending the reworked package back to the Senate. But Senate Republicans warn this would wreck the deal with Obama.
Sen. Kent Conrad (D-N.D.), a senior member of the Finance Committee, cautioned Thursday that "it's very hard to get things changed."
Reid, who had remained noncommittal after Obama and McConnell announced their deal, threw his support behind the package on Thursday.
“This bill is not perfect, but it provides the economic boost middle-class families and small businesses in Nevada and across America need,” Reid said in a statement. "Middle-class families and small businesses will see their taxes go down.”
Reid touted tax provisions included in the original deal such as a two-percentage-point cut in payroll taxes, the child tax credit and the earned income tax credit as well as provisions he added to sweeten the deal for House liberals.
“It provides incentives to create clean energy jobs, energy-efficient homes and investments in renewable energy,” Reid said. “And it will ensure that the millions of Americans still looking for work in this economy will continue to have the safety net they rely on to make ends meet.”
Senate Republicans praised the legislation, which did not alter the core components of the agreement between Obama and McConnell.
“Continued tax relief gives people the ability to keep more of their money to use as they see fit, whether it’s buying groceries or investing in their small business,” said Sen. Chuck Grassley (Iowa), the ranking Republican on the Senate Finance Committee. “Sending more money to Washington would just result in more government spending, which is the last thing the country needs.”
Rep. Dave Camp (Mich.), the ranking Republican on the House Ways and Means Committee, said, "This agreement does two things the economy needs: prevents a tax increase on all Americans who pay income taxes and provides a foundation for job creation.”
He warned “failure to move this agreement forward will be a devastating blow to American taxpayers, small businesses and our nation’s economic recovery.”
The legislation, however, does not include an extension of the Build America Bonds program, for which a group of at least 10 Democratic senators, led by Sen. Ron Wyden (D-Ore.), lobbied.
Grassley and Camp slammed Build America Bonds as one of the “most flawed and expensive programs” of the 2009 stimulus package. The program provides federal subsidies for the interest that state and local governments pay on municipal bonds.
Reid’s legislation also fixes the Alternative Minimum Tax to shield an estimated 21 million households from higher taxes and extends a variety of business tax relief provisions, such as the research and development tax credit.
White House press secretary Robert Gibbs predicted Thursday that House Democrats would ultimately allow the package to pass.
“At the end of the day” the bill will pass both houses, Gibbs said at his daily press briefing.
Ben Geman and Vicki Needham contributed to this report.
This story was posted at 8:21 a.m. and updated at 1:36 p.m.