One funny thing about the Senate's vote last night to extend the Bush tax cuts for income under $250,000: it was a vote of the Senate. Usually, taxing and spending bills originate in the House because of the "origination clause" in Article I of the Constitution. So Republicans think the bill's Senate origins mean it cannot become law.
The Bush tax cuts aren't just limited to personal income: They also lowered rates on income from stocks, bonds, and other investments that are held by a fairly broad swath of Americans. A recent report by Ernst & Young reveals that a fairly diverse group benefits from dividends, one of the most popular kinds of investments. But the wealthiest overwhelmingly make the most money off of investments—and thus get the biggest tax breaks.
The Democratic leadership on Capitol Hill rushed to unite behind President Obama's proposal to pass a one-year extension for household incomes below $250,000. In the Senate, they're are pushing for a one-year extension with a $250,000 cut off that could come up for a vote as soon as next week. But there is one key difference between the Senate Dems and Obama: the tax rate on investment income.
Citizens for Tax Justice points out that the White House's $150 billion price tag on Obama's one-year tax cut extension only appears to include part of the total cost—the income tax cuts. Obama's own 2013 budget includes a permanent fix to the Alternative Minimum Tax and some relief from scheduled estate tax hikes, which are both separate from the standard income tax. Adding these in would add $80 billion to the total.
Does the administration anger its base and muddle its message by working with Republicans to put off the fiscal cliff -- which would mean extending all the Bush tax cuts -- until 2013? Or does it stand and fight on taxes, even if that means markets begin to panic in the most crucial months for the president's reelection?