OVERNIGHT MONEY: Tax battle escalates in the Senate

By Bernie Becker and Vicki Needham - 07/19/12 06:30 PM ET

THE NEXT BIG STORY:

The Senate might have battled over taxes last week and this week, but that appears to have been just the undercard.

Next week's main event will be the Bush-era tax rates.

The chamber is expected to vote next week on a Democratic proposal to extend the current tax rates only for family incomes up to $250,000 a year, a plan which would also hike up the top rate on dividends and capital gains to 20 percent.

Sen. Charles Schumer (D-N.Y.) had suggested that Senate Majority Leader Harry Reid (D-Nev.) would start putting the wheels in motion on the bill on Thursday, but the chamber adjourned without Reid filing for cloture.

Democrats did signal that they would drop the estate tax plank that had accounted for roughly $22 billion of what had been a $272 billion measure. A leadership aide suggested the two sides could fight over the estate tax, which is expected to see a drastic hike at the end of the year, at another time.

That further ensures that next week's fight will center on tax rates for the top 2 percent, which Democrats want to see rise and Republicans want to see continued.

Democrats say the extra revenue for the wealthiest is needed to help reduce deficits, while Republicans continue to declare that the government's problem is on the spending side. Democrats have also made more noise in recent days about letting all the current tax rates expire if they don't get the sort of deal they're looking for.

Republicans are hoping for a Senate vote on a plan to extend all current rates, a proposal the House plans to vote on in the coming weeks as well.

Next week's action comes after Republicans blocked a Democratic proposal that would have stripped tax breaks for companies that move operations offshore, and given incentives to those that did the opposite.

LOOSE CHANGE:

Say no to the farm bill: The Heritage Foundation announced its support for House Republican leaders who haven't decided whether to consider the 2012 farm bill, approved recently by the House Agriculture Committee.

"We commend Speaker [John] Boehner [(R-Ohio)] for his longstanding and continued resistance to big-spending farm and food stamp bills," said Michael Needham, chief executive of Heritage.

"With our nation’s debt approaching $16 trillion, we cannot afford another $1 trillion boondoggle," he said. "Nor can we continue, in the Speaker’s words, ‘Soviet-style’ farm programs that create perverse, market-distorting incentives."

See these stories for more information:

— Boehner: No decision yet on farm bill

— GOP pressures Boehner on farm bill

The dogs days of the economic recovery: More bad economic news rained down on Thursday, painting a picture of the weakening economic recovery amid a European financial crisis and uncertainty over tax and spending policies in front of Congress.

WHAT YOU MIGHT HAVE MISSED

— Poll: Majority says Romney should release more tax returns
— GOP pins sequester on Obama
— GOP-led panel rips GOP donor's business practices in Peru
— JCT: GOP tax plan costs $29 billion more than Dems
— Ryan urges both parties to get less cozy with big business
— Drumsticks and violins: GSA event costs taxpayers $270,000
— Banks challenge government tactics in discriminatory lending cases
— Deal struck in House on Russia trade bill
— Hatch calls Dems' 'insourcing' bill 'misleading'
— Business groups urge senators to oppose 'insourcing' bill
— Reid accuses Senate GOP of blocking outsourcing bill to protect Romney
— Republicans target CBO secrecy
— Durbin: Reach a deal to avoid 'fiscal cliff' or 'pay the price'
— House Republicans establishing online home for Dodd-Frank critiques
— Unemployment claims take big leap