Senate Dems pass $250K tax plan

Senate Democrats on Wednesday narrowly passed President Obama’s plan that would extend Bush-era tax rates for family income up to $250,000 a year.

The surprising passage of the bill was a victory for Senate Majority Leader Harry ReidHarry Mason ReidThe Hill's 12:30 Report - Presented by Connected Commerce Council - Biden faces reporters as his agenda teeters Biden hits one-year mark in dire straits 'All or nothing' won't bolster American democracy: Reform the filibuster and Electoral Count Act MORE (D-Nev.) and the White House, though the highly contentious vote will undoubtedly be used by Republicans as political ammunition this election year. They ripped Democrats for seeking to raise taxes in an ailing economy.


By a 51-48 tally, Democrats overcame two defections to win passage of the measure, which would also raise the top rate on capital gains and dividends, as well as continue several targeted tax provisions that Democrats say help the middle class.

Earlier in the afternoon, the Senate turned aside a Republican proposal, by a mostly party-line vote of 45-54, that would have extended all current rates on income, capital gains, dividends and the estate tax, also for a year. Two Republicans, Sens. Susan CollinsSusan Margaret CollinsThe Hill's Morning Report - Presented by Facebook - Biden clarifies his remarks on Russia Effort to overhaul archaic election law wins new momentum Bipartisan lawmakers announce climate adaptation bill MORE (Maine) and Scott Brown (Mass.), voted against both plans, and Sen. Mark PryorMark Lunsford Pryor11 former Democratic senators call for 'meaningful reform to Senate rules' Kyrsten Sinema is less of a political enigma than she is a strategic policymaker  Bottom line MORE (D-Ark.) voted for the two proposals. Pryor is up for reelection in 2014.

The dramatic roll calls came as Vice President Biden presided over the tally. He was in the chamber in case his vote, as president of the Senate, was needed to break a tie.

Although the Republican bill was unlikely to pass the Senate and the Democratic bill faces grim prospects in the Republican-controlled House, leaders of both parties sought to send an election-year message on tax rates and display party unity.

In the second roll call, Senate Democrats lost the votes of the two members of their caucus who had already indicated they would vote no — retiring Sens. Joe Lieberman (I-Conn.) and Jim Webb (D-Va.).

Lieberman said on the Senate floor that both the Republican and the Democratic plan amount to a punt at a time of trillion-dollar annual deficits. Webb, meanwhile, said that he would not support increasing taxes on ordinary income, but believed that rates for capital gains could go higher. 

But Democrats were able to hang on to votes from other potential fence-sitters, including Sens. Joe ManchinJoe ManchinVoting rights failed in the Senate — where do we go from here? Biden: A good coach knows when to change up the team The Memo: Biden looks for way to win back deflated Black voters MORE (D-W.Va.) and Ben Nelson (D-Neb.), who both voted against a similar proposal in 2010. Manchin is up for reelection this fall, while Nelson is retiring.

Nelson told reporters after the vote that it was a tough decision that wasn’t made any easier by the fact the vote is unlikely to go anywhere in the House.

“We vote on a lot of things that are DOA in the House. The House votes on a lot of things that are DOA in the Senate,” Nelson said. “So that’s not the test.”

Sens. Claire McCaskillClaire Conner McCaskillBiden, lawmakers mourn Harry Reid Harry Reid, political pugilist and longtime Senate majority leader, dies On The Trail: Trump-inspired challengers target GOP governors MORE (D-Mo.), Jon TesterJonathan (Jon) TesterSmall ranchers say Biden letting them get squeezed Schumer opted for modest rules reform after pushback from moderates The Hill's 12:30 Report - Presented by Connected Commerce Council - Biden faces reporters as his agenda teeters MORE (D-Mont.), Bill NelsonClarence (Bill) William NelsonOvernight Energy & Environment — Earth records its hottest years ever Global temperatures in past seven years hottest ever observed, new data show NASA welcomes chief scientist, senior climate adviser in new dual role MORE (D-Fla.) and Kay HaganKay Ruthven HaganInfighting grips Nevada Democrats ahead of midterms Democrats, GOP face crowded primaries as party leaders lose control Biden's gun control push poses danger for midterms MORE (D-N.C.), all of whom face potentially difficult reelection races in November or in 2014, also backed Obama’s proposal. 

The votes came following a topsy-turvy morning of legislative maneuvering in which Minority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellBiden: A good coach knows when to change up the team McConnell says he made 'inadvertent omission' in voting remarks amid backlash These Senate seats are up for election in 2022 MORE (R-Ky.) consented to allowing straight up-or-down votes on the two tax plans. The Senate had been scheduled to hold a procedural vote on just the Democratic plan, which would have needed 60 votes to advance. 

McConnell, speaking on the Senate floor, suggested his move was meant to smoke out vulnerable Democrats, and make them put their cards on the table. “The American people should know where we stand,” McConnell said. “Today they will.”

Reid has said for weeks that he could muster a majority for the tax plan. The passage of the bill came after Democrats bickered over whether to raise the $250,000 threshold to $1 million annually. 

Obama refused to budge from his $250,000 mark, and congressional Democrats recently rallied behind their president, who is deadlocked in his reelection race with Mitt Romney. 

With Wednesday’s vote, a Democratic aide said, the chamber had upped the pressure on the House, with President Obama now being able to single out Republicans — and not just Congress — for not passing tax relief for the middle class.

“Why don’t we pass this now, give real relief to the middle class, and have the other debate later?” Sen. Charles SchumerChuck SchumerVoting rights failed in the Senate — where do we go from here? Forced deadline spurs drastic tactic in Congress Democrats call on Biden administration to ease entry to US for at-risk Afghans MORE (D-N.Y.) said, referring to the question of whether to extend the tax rates to income levels between $250,000 and $1 million. Schumer has previously embraced the higher threshold. 

Both Republicans and Democrats believe they have the upper hand on taxes, with 103 days to go before the election. Leaders of the respective parties are looking to win the message war this fall while also jockeying for leverage in advance of the post-election lame-duck session — when most of the substantive decisions on big-ticket tax and fiscal issues are expected to be made. 

For starters, measures that raise revenues are, under the Constitution, supposed to start in the House, and McConnell objected on Wednesday to a request from Reid to fix that issue.

Democrats noted Wednesday that Republicans had allowed bills dealing with transportation and the Federal Aviation Administration to move forward, even though they could have been tripped up by the same problem.

Regardless, the House is expected to hold its own vote next week on a measure that, similar to the Senate Republican bill, would essentially extend all Bush-era rates for a year. 

The House is expected to reject Obama’s plan while pushing for legislation to force a comprehensive revamp of the tax code in 2013.

“Here in the House, where tax legislation originates under the Constitution, we’re going to vote to stop the tax hike,” Speaker John BoehnerJohn Andrew BoehnerDemocrats eager to fill power vacuum after Pelosi exit Stopping the next insurrection Biden, lawmakers mourn Harry Reid MORE (R-Ohio) said in a statement. “That much is clear.”

Either way, Republicans and Democrats are expected to continue their broadsides, with each side accusing the other of holding tax relief hostage for political gain.

“All sides agree on the need to extend the tax cuts for the middle class — this legislation reflects that consensus,” the Obama administration said in a policy statement.

GOP lawmakers, meanwhile, have accused Democrats of seeking a tax hike on small businesses, and said that the current sluggish economy should convince policymakers not to raise anybody’s taxes at the end of the year. 

Republicans lambasted Democrats for leaving the estate tax out of their tax proposal, with the tax’s parameters scheduled to get much less generous at the end of the year.

Senate Democrats had been calling to reinstate 2009 estate tax levels, which have also been endorsed by Obama. But with some Democrats suggesting they prefer the current estate tax policy, party leaders dropped the proposal from their plan.

Sen. Orrin HatchOrrin Grant HatchMeet Washington's most ineffective senator: Joe Manchin Lobbying world Congress, stop holding 'Dreamers' hostage MORE (Utah), the ranking Republican on the Finance Committee, and other GOP lawmakers have said that the Democrats’ decision could ensnare many more family farms and small businesses.

But Senate Majority Whip Dick DurbinDick DurbinThe Memo: Biden looks for way to win back deflated Black voters Effort to overhaul archaic election law wins new momentum Senate panel advances bill blocking tech giants from favoring own products MORE (D-Ill.), citing polling on the issue, said that he thought Wednesday’s vote would be a boon to Democratic candidates in tough races, and that Republicans were on the wrong side of the issue.

“Just take the phrase: ‘The top 2 percent of wage earners pay their fair share,’” Durbin said. “We’ve tested it in every direction. We know where people stand on it. They’re wrong, and they’ve been wrong.”

— Updated at 9:08 p.m.