Senate passes tax package 81-19, sending Obama deal to the House

The Senate voted overwhelmingly Wednesday to pass an $858 billion tax relief and benefits package, giving the bipartisan deal political momentum as it heads to the House.

The Senate voted 81 to 19 in favor of the deal struck by President Obama and Senate Republican Leader Mitch McConnell (R-Ky.).

“Middle class families need a boost in this economy, and that is exactly what this plan gives them," Senate Majority Leader Harry Reid (D-Nev.) said in a statement after the vote. "It is not perfect, but it will create 2 million jobs, cut taxes for middle class families and small businesses, and ensure that Americans who are still looking for work will continue to have they safety net they rely on to make ends meet."

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The legislation now heads to the House, where Democrats are debating whether to rewrite the estate tax provision and substitute a 45-percent tax on estates over $3.5 million.

A House Democratic aide said the bill would be posted on the Rules Committee site by mid-afternoon Wednesday. Leadership aides in the House said it is not expected to receive a vote until Thursday.

The package extends almost all of the Bush tax cuts, including income tax cuts for the nation’s wealthiest families, for two years and sets the estate tax at 35 percent for individual inheritances of more than $5 million.

It extends federal unemployment benefits for 13 months at a cost of $56.5 billion and cuts the Social Security payroll tax 2 percent, giving workers a $120 billion tax break for 2011.

Senate passage of the tax deal was all but assured after 83 senators voted on Monday evening to end an effort to delay it. All of the senators who opposed moving forward on the package Monday also voted against final passage. They were joined by Sens. Byron Dorgan (D-N.D.) and Tom Udall (D-N.M.), who voted to end the filibuster on Monday but voted against final passage.

The senators who voted against final passage were Sens. Jeff Bingaman (D-N.M.), Tom Coburn (R-Okla.), Jim DeMint (R-S.C.), John Ensign (R-Nev.), Russ Feingold (D-Wis.), Kirsten Gillibrand (D-N.Y.), Kay Hagan (D-N.C.), Tom Harkin (D-Iowa), Frank Lautenberg (D-N.J.), Pat Leahy (D-Vt.), Carl Levin (D-Mich.), Jeff Merkley (D-Ore.), Bernie Sanders (I-Vt.), Jeff Sessions (R-Ala.) and Mark Udall (D-Colo.).

“My concern is that what happens in the Senate often is the short term becomes the enemy of the long term,” said Wyden. “This makes it tougher to deal with the debt and tax reform. At some point you have to break the procrastination.”

Retiring Sen. George Voinovich (R-Ohio) has called for all of the Bush-era tax cuts to expire to give Congress motivation to take up tax reform.

The co-chairmen of President Obama’s fiscal commission called for tax reform in a draft proposal earlier this year. They suggested eliminating all tax breaks and lowering the individual and corporate income tax rates.

The Senate went in the other direction Wednesday. The tax package includes a slew of business and energy tax relief provisions, such as the research and development tax credit; the ethanol tax credit; the biodiesel and renewable diesel tax credit; the energy efficient homes tax credit; and cash grants for the wind and solar energy industry.

The package also includes a provision allowing businesses to deduct 100 percent of the cost of certain investments in 2011. It would also fix the Alternative Minimum Tax to shield an estimated 21 million taxpayers from higher taxes.

House Majority Leader Steny Hoyer (D-Md.) said Tuesday the lopsided Senate vote to cut off a filibuster of the package had given it political momentum.