Here’s one thing most Republicans and Democrats can agree on: Congress should act to keep taxes from going up for the average American when the Bush-era tax cuts expire at the end of the year.
Particularly in an election year, however, coming to agreement to do so is much easier said than done.
On Wednesday, the Democrat-led Senate plans to hold a procedural vote to start considering a $250 billion Democratic bill that would extend the tax cuts for individuals making less than $200,000 per year and couples making $250,000 per year. The tax cuts on income above those levels would be allowed to expire, which would mean increased taxes on 2.5 million of the nation’s wealthiest households. (The highest rates would increase from 33 percent to 36 percent and 35 percent to 39.6 percent.) The Democratic plan would also increase the estate tax, which is now 35 percent on estates over $5 million per person, to 55 percent on estates over $1 million per person. It would also increase the top capital gains tax rate and limit itemized tax deductions.
The Democratic plan, which is similar though not identical to President Obama’s proposal, needs 60 votes to proceed. If it gets those votes, Republicans plan to offer their alternative tax plan as an amendment. The $405 billion GOP plan would extend the tax cuts for everyone, including the wealthiest American, while (unlike the Democratic plan) allowing certain tax breaks to expire for millions of the poorest Americans. Republicans maintain that those tax breaks, which benefit low income college students and recipients of the earned income tax credit and Child Tax Credit, were always meant to be temporary.