Senate approves extension of Bush tax cuts

By Mark Arsenault and Matt Viser, Globe Staff

WASHINGTON – The US Senate this afternoon gave its final approval to a sweeping tax and stimulus package that would extend tax cuts for all Americans and attempt to jolt the economy into revival.

The Senate voted 81-to-19 in favor of the deal, with broad bipartisan support. The legislation still needs the approval of the House, something that could come as soon as late today, despite continued angst from liberal Democrats.

The compromise united in opposition two odd bedfellows on opposite sides of the political spectrum: Senator Bernie Sanders, the Vermont socialist, and Republican Senator Jim DeMint, a Tea Party conservative from South Carolina. Each tried unsuccessfully to amend the package today, though with contradictory goals. Sanders wanted to strip temporary tax breaks from the wealthy from the deal, while DeMint wanted to make all the tax cuts permanent. Both proposals were knocked down, as proponents of the deal understood that any major changes probably would scuttle it. Both senators voted against the final deal.

The senators from Massachusetts, Democrat John Kerry and Republican Scott Brown, supported the compromise.

The focus of the debate now swings to the US House of Representatives. House Democrats held a closed-door caucus last night to discuss the proposal. Last week, the caucus objected – to chants of “Just say no!” – to scheduling a vote on the tax bill without major changes. But the objection came in a non-binding voice vote in the heat of emotion, and by this week House leaders began predicting that the compromise would ultimately pass.

"I think, frankly, that ultimately we will pass legislation," House Majority Leader Steny Hoyer told reporters yesterday. "The vote in the Senate indicates an urgency that is felt by a broad spectrum that the middle income taxes not be increased come Jan. 1. In order to affect that, you've got to pass the bill.”

House Republican Leader John Boehner believes his members “are generally supportive, and will not insist on amendments,” Boehner spokesman Michael Steel said today.

The legislation, the result of a compromise hammered out by President Obama and Senate Republicans, would extend all of the Bush-era income tax cuts for two years, renew a federal program to extend unemployment benefits for the longtime jobless, cut the payroll tax, and retain a series of other tax cuts for businesses and individuals. Many Democrats object to extending the tax cuts to family income above $250,000 per year, and have criticized Obama for yielding to Republican demands that the cuts be extended to all income.

House Democrats have lately focused their ire on the estate tax, saying the deal’s proposed rate of 35 percent is too low and the thresholds of protected assets -- $5 million for individuals – are too high. Many Democrats prefer returning to 2009 rates: a 45-percent tax on assets above $3.5 million.

One option for House Democrats would be to vote on an amendment that would impose a higher estate tax, although Senate Minority Leader Mitch McConnell, a Kentucky Republican, has warned that the agreement will fall apart if major changes are made.
All told, the tax and stimulus package would cost about $855 billion, according to preliminary projections by the Joint Committee on Taxation.

The parties had an incentive to work together to reach the deal, with a deadline approaching that could have dire political consequences: if Congress does not pass a bill before Dec. 31, taxes will rise for most Americans.

President Obama today urged Democrats and Republican to look past what they don’t like about the deal. “That’s the nature of compromise,” Obama said. “But we worked hard to negotiate an agreement that’s a win for middle-class families and a win for our economy, and we can’t afford to let it fall victim to either delay or defeat.”