Senate narrowly approves Democratic plan on Bush-era tax rates, compromise elusive

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Power Play 7-25-2012

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The Senate voted Wednesday to approve a Democratic proposal to partially extend the Bush-era tax rates -- while letting taxes rise for top earners -- in an election-year showdown that served more to put lawmakers on record over the tax rates than advance any particular plan.

The Senate narrowly approved the bill on a 51-48 vote. The plan would extend current rates for households making less than $250,000, and let the rates rise for everyone else. The move came after the Senate rejected a Republican measure extending the Bush-era rates for everyone next year, including the nation's highest earners.

Though a win for Democrats, the approval of their tax plan late Wednesday afternoon could amount to little. Republicans have an overwhelming majority in the House, and are likely to reject the bill on procedural grounds anyway -- by citing a provision that revenue bills are supposed to originate in the House.

Still, the floor of the Senate Wednesday served as a high-profile debate stage for an issue both sides have sought to leverage to their political favor. Republicans claim increasing taxes on the well-to-do would stifle job creation because many of those affected own businesses. Democrats claim that argument is overblown and that the rich have to contribute more to deficit-reduction efforts. Each side accuses the other of endangering the middle class and the fragile economic recovery by refusing to promptly accept their own tax rate plan.

Amid the political display, some very real pocketbook concerns are at stake. If Congress is unable to come to any agreement by Jan. 1 over the expiring rates, taxes will rise for everyone and potentially sap already-meager economic growth.

Not a single Republican voted for the Democrats' tax bill Wednesday. Democratic Sen. Jim Webb of Virginia and Independent Sen. Joe Lieberman of Connecticut also voted "no." Vice President Biden presided over the vote in case of a tie.

Earlier, the Senate rejected the GOP bill to extend the Bush-era rates for everyone on a 45-54 vote. One Democrat, Sen. Mark Pryor of Arkansas, voted for that bill. Republican Sens. Scott Brown of Massachusetts and Susan Collins of Maine voted against it.

"This is more about the election than it is about the economy," Senate Republican Leader Mitch McConnell said on the floor Wednesday, debating Senate Democratic Leader Harry Reid between votes on the GOP and Democratic plans. McConnell said the Democrats' bill would be "a very, very bad idea for the U.S. economy."

Reid urged Republicans not to use a "procedural trick" to hold up the Democrats' bill in the House. Echoing the guidance of President Obama, Reid urged Republicans to pass the Democrats' bill now, and then proceed to debate over tax rates for top earners only.

The White House says if the tax rates are not renewed, families earning less than $250,000 would see tax increases averaging $1,600.

The Associated Press contributed to this report.