Correction to This Article
An earlier version of this article incorrectly described the details of the Obama administration's plan to end the Bush-era tax cuts for most Americans. President Obama wants to preserve the cuts for income under $250,000 a year for couples filing jointly and for income under $200,000 a year for individuals.

Senate Democrats postpone tax cut vote until after elections

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By Lori Montgomery
Washington Post Staff Writer
Thursday, September 23, 2010; 6:44 PM

Senate Democrats said Thursday that they had abandoned plans for a pre-election showdown with Republicans over taxes, postponing any vote on extending Bush administration tax cuts until after the November midterms.

Democrats discussed the issue during a caucus luncheon but left the final decision to Senate Majority Leader Harry Reid (D-Nev.). Late Thursday, Reid spokesman Jim Manley said, "We will come back in November and stay in session as long as it takes to get this done."

The Senate's second-ranking Democrat, Richard J. Durbin (D-Ill.), acknowledged earlier that the party lacked the votes to extend the cuts for middle-class families.

"Harry will make the final decision on this, but the reality is we are not going to pass what needs to be passed to change this either in the Senate or in the House before the election," Durbin said before Manley's statement. "There's no evidence of any bipartisan spirit to deal with the bigger issues. We're hoping to get a continuing resolution passed -- that's it -- to continue [running] the government until we return after the election."

The Senate left for the weekend Thursday afternoon and will not return until early next week, when Reid has scheduled a vote on a bill to prevent firms from sending jobs overseas and reward those that bring jobs back to the United States. Congressional leaders are aiming to get lawmakers out on the campaign trail by the end of next week.

The issue of companies that ship jobs overseas proved politically potent in a Pennsylvania special election this year. With unemployment at 9.6 percent, Democrats say a measure to create jobs would speak more directly to the concerns of voters anxious about the economy. Reid and other key Democrats this week unveiled a bill that would offer businesses a two-year payroll tax holiday on jobs repatriated from abroad. The measure also would end subsidies for certain manufacturing companies that do business overseas or close U.S. plants and move them offshore.

"It is resonant," said Sen. Byron L. Dorgan (D-N.D.), one of the bill's sponsors. "Somewhere around 20 million people woke up without work today. We're trying to find a way to put an end to the incentives to move jobs overseas."

Unless Congress acts on the tax issue, tax cuts enacted in 2001 and 2003 for every American taxpayer will expire in January, raising income tax rates across the board. If a vote is postponed, Democrats in both chambers vowed to take up the matter soon after they return on Nov. 15.

"There will no tax increase for middle-income Americans, whether we do it today or six weeks from today," said House Majority Leader Steny Hoyer (D-Md.) "We will make sure there is no middle-class tax increase before this year ends."

Republicans want to extend all the cuts, at a cost of nearly $4 trillion over the next decade. President Obama has proposed extending the cuts only for income under $250,000 a year, a move that would cost about $3 trillion over the next decade.

Sen. Max Baucus (D-Mont.), the Finance Committee chairman, is preparing a smaller bill that would cost nearly $2 trillion over the next decade. Aides said that measure would permanently extend cuts that benefit the middle class but would protect taxpayers from an expensive parallel tax structure, known as the alternative minimum tax, only through 2011, reducing the cost to the government.

Democratic leaders had hailed the battle over the upper-income cuts as an electoral winner for them, saying it would force Republicans to defend big tax breaks for about 3 million extremely wealthy households, many of them headed by millionaires. They said it would also expose GOP hypocrisy on budget deficits at a time when Republicans were blaming Democrats for driving up the national debt.

House Democratic leaders still hold that view, and Speaker Nancy Pelosi (Calif.) may yet call a vote in the House before the election, aides said, despite complaints from more than three dozen conservative Democrats who are fearful of raising taxes, even on the wealthy, in an election year.

But many Senate Democrats have come to see the tax battle as less important politically. By clearly outlining the Democratic position, aides said, Obama has taken some of the sting out of Republican claims that Democrats are plotting to let all the tax cuts expire, causing taxes to rise next year for virtually every American.

"By the president being out there and individual members talking at home, it's clear where the lines are drawn in this debate, and you don't need the vote to cement that," a Democratic aide said, speaking on the condition of anonymity to discuss internal deliberations. "The battle lines are already drawn. The contrast exists. The president has provided that air cover."

Delaying the vote would also paper over divisions in the party rank and file. Although liberals are determined to let the tax cuts expire for the wealthy - Sen. John D. Rockefeller IV (D-W.Va.) called it a "moral issue" - many conservative Democrats are pushing to extend all the cuts, saying raising anyone's taxes right now would be bad for the economy.

That camp includes Sen. Ben Nelson (D-Neb.), who is scheduled to take part in an event defending the Bush-era tax cuts next week at the conservative Heritage Foundation.

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