The Senate today rejected two attemps by the Democrats to raise taxes on high-income earners. The first attempt was a proposal to extend the Bush tax cuts, but only for the first $250,000 per year of income. It received 53 of the 60 votes necessary (with 36 opposed). The second proposal would have extended the Bush tax cuts, but only up to $1 million a year. It too garnered only 53 votes (with 37 opposed). All Republicans who voted opposed the tax increases.
These votes needed to be taken so that the Democrats will have the Republicans on record as holding continued tax relief for the middle class hostage to continued tax relief for higher earners. Now that the votes have occurred, Congress and the administration can get on more seriously with the business of preventing everyone’s taxes from going up in a few weeks.
To accomplish this, Republicans will probably have to give President Obama something in return. A likely candidate is a lengthy extension of emergency unemployment benefits. This seems like a small price to pay; indeed, it is arguably a humanitarian action that would have merit standing alone. Presumably, the White House will ask for a few more additional goodies in the form of spending that has less merit.
Some liberal Democrats have signaled that they intend to oppose a deal that would extend the Bush tax cuts across-the-board. Such a deal would require plenty of Democratic support to achieve the required super-majority in the Senate and a majority in the House. In the Senate, the support of semi-moderate Dems like Lieberman, Webb, Manchin, Ben Nelson, Pryor, Landrieu, etc would not be sufficient. The first four, by the way, joined with Republicans in voting against a tax hike on income above $250,000. They voted in favor of a threshold of $1 million, but Durbin, Harkin, and Rockefeller voted against that legislation to protest raising the “tax the rich” threshold that high.
Despite the determination of such leftists, a deal between Republicans and Obama would, I suspect, be likely to carry the day.
If Republicans are unwilling to accept White House demands, they could let the tax cuts expire and revisit the issue come January. But with no majority in the Senate (never mind a super majority), the Republicans still may not be holding a fully winning hand. Public outrage will have kicked in (along, perhaps, with a major decline in the stock market), but it’s not clear that such outrage would be directed wholly, or even mainly, at the Democrats, now that they have voted to extend the tax cuts for the middle class.
JOHN adds: You can almost hear teeth gnashing in the New York Times account, headlined “Senate Rejects Obama’s Tax Plan, Setting Stage for Deal.”
The Senate on Saturday rejected President Obama’s proposal to extend the Bush-era tax breaks for all but the wealthiest taxpayers, a triumph for Republicans who have long called for continuing the income tax cuts for everyone. …
In a sign of the deepening divisions between the administration and Congressional Democrats, White House officials had voiced their opposition to raising the threshold to $1 million, saying it would do little to reduce the deficit. The defeat of Mr. Schumer’s proposal underscored a harsh defeat for Democrats both on policy and political messaging. …
Some Democrats supported a temporary extension of the Bush-era tax rates at all levels, and it was quickly clear that Senate Democrats could not generate sufficient votes in favor of Mr. Obama’s plan — so the issue was put off until after the election.
The drubbing Democrats took in the elections, as Republicans won a majority in the House and picked up six seats in the Senate, further undermined the Democrats’ negotiating position. Republicans have since viewed an extension of the lower income tax rates as a foregone conclusion.
To speed up what they viewed as the Democrats’ inevitable capitulation, Senate Republicans said they would block virtually all legislative business on the Senate floor until the tax debate was resolved and a temporary spending measure had been adopted to finance the government.
Anything the Times hates this much must be good!