Domestic Taxes

Reid, Senate Dems go hardball on taxes

Senate Majority Leader Harry Reid (D-Nev.) has adopted a hardball strategy for dealing with Republicans on the expiring Bush-era tax cuts. 

Reid will force a vote on extending tax cuts for families earning below $250,000 and individuals below $200,000 that would allow tax rates on the wealthy to expire. But it’s not clear whether that vote will be on a permanent or temporary extension because of a split in the Democratic caucus, a notable change since the election. 

In the run-up to Election Day, Reid pressed for a permanent extension, a position supported by President Obama.

{mosads}In the wake of a draft proposal from the co-chairmen of Obama’s fiscal commission, which calls for steep spending cuts over the next decade, there is less Democratic support setting tax rates indefinitely.

Reid will also give senators the option of voting for legislation sponsored by Republican Leader Mitch McConnell (D-Ky.) that would extend all of the Bush tax cuts permanently. The bill would permanently extend current tax rates for the nation’s wealthiest families and eliminate the estate tax.

The strategy is designed to draw a sharp contrast between Democrats and Republicans on tax policy. The intent is to portray Democrats as protectors of the middle-class and Republicans as beholden to the wealthy.

Reid said Democrats would emphasize the budget impact of extending all of the Bush-era tax cuts, seeking to turn the argument of fiscal responsibility back on Republicans, who used it successfully during the campaign.

Reid, at least initially, is not offering a vote on temporarily extending all of the tax cuts for one or two years, which has been seen as the compromise mostly likely to pass. Republicans want all of the tax cuts permanently extended, while Democrats want to extend only the tax cuts for the middle class. 

Senior Democratic leadership aides said it is unclear what the next step would be if both of Reid’s options are defeated. All of the tax cuts approved by Congress in 2001 and 2003 are set to expire at the end of the year. 

Reid said he would hold multiple votes on extending just the middle-class tax cuts, a hard-ball political tactic not often used in lame-duck sessions, which lawmakers have traditionally struck compromises to mop up unfinished business.  

“As you know, my friend Senator McConnell (R-Ky.) has offered legislation to extend them all, costing $4 trillion,” Reid said Thursday afternoon. “If he wants a vote on that, I’ll be happy to help arrange that. But he should also help arrange a vote on 250, period.

“We want to give Republicans an opportunity to vote on McConnell’s legislation and we want opportunity and maybe plural to vote once, twice, whatever it takes to show the American people we support the middle class,” Reid said.

He announced his legislative plan after meeting with the Senate Democratic Conference for more than three hours on Thursday. A Democratic leadership aide said the strategy was affirmed during a meeting between President Obama and Senate Democratic leaders Thursday morning.

House Democrats have also decided to hold a lame-duck vote on extending tax rates only for middle-class families, according to an aide to House Majority Leader Steny Hoyer (D-Md.).

Senate Democrats have met this week for a total of nine to 11 hours, by Reid’s estimate, to unify their caucus and hash out a strategy for the lame-duck session and the beginning of the 2012 election cycle. 

“The main thing we’ve learned is that we’re united in recognizing that we have to protect the middle class because obviously the Republicans aren’t doing it,” Reid said after the meeting. 

Republicans have also taken a hard stance, refusing to support any compromise that would raise taxes, even on millionaires. Republicans argue that raising taxes on the wealthy will hurt small businesses and slow economic growth.

“The most important thing we can do to create jobs between now and Jan. 1 is to send a message to job creators that we’re not going to raise their taxes,” McConnell said in a floor speech Thursday.

Reid called on Republicans to drop their obstructionist tactics and compromise.

“Republicans have spent the last four years ready to campaign but very reluctant to govern, with campaign season over, it’s time they start working with us for a change,” he said.

Republicans counter that Reid’s agenda for the lame duck shows he’s not ready to move beyond politics. They point to votes that Reid promised during the campaign to mobilize the Democratic base.

At the top of that list is the Dream Act, which would grant permanent residency to the children of illegal immigrants if they meet certain conditions.

The partisan sniping leaves lawmakers with little hope of reaching a compromise any time soon.

“Unfortunately this place has become a caldron of politics as opposed to policy,” said Sen. Ben Nelson (Neb.), a Democratic centrist who supports a short-term extension of all of the Bush tax cuts.

A Republican leadership aide said neither tax proposal outlined by Reid would gain 60 votes.

Republican aides predict that several Democratic senators would vote for a temporary extension of all the Bush tax cuts. Sens. Blanche Lincoln (Ark.), Kent Conrad (N.D.), Evan Bayh (Ind.), Jim Webb (Va.) and Nelson have voiced support for this option.

Some Democrats have also begun to coalesce around a plan floated by Sen. Chuck Schumer (N.Y.), vice chairman of the Democratic conference, to raise taxes only on families earning above $1 million.

Mike Lillis contributed to this report. 

Tags Chuck Schumer Harry Reid Mitch McConnell

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