House And Senate Dems Out Of Sync On Tax Cut Strategy

November 22, 2010 6:29 a.m.

After a flurry of meetings, phone calls, member-to-member discussions and public jousting with Republican leaders, Democrats left Washington on Friday aware of two key facts: Both the House and Senate will eventually vote to allow the Bush tax cuts on upper-income earners to expire; but party leaders in neither chamber have a clear path to winning that vote. And more importantly, with the White House still pressing for a bipartisan solution that can pass before the end of the year, the only thing that’s certain is that nobody has any clue what the final tax cut compromise will look like.

Despite months of intra-party wrangling over how to proceed on tax cuts, House and Senate aides, speaking under the condition of anonymity, paint a picture of two chambers dramatically out of sync with one another. Senate Democrats and House Democrats alike continue to negotiate among themselves, with little understanding of what their counterparts are planning or can accomplish.That strongly suggests that the votes themselves will serve mostly symbolic and political purposes, but that any final compromise will likely emerge from a bruising and chaotic legislative fight as the days tick down toward the end of the year, and all the tax cuts expire.

In the Senate, Majority Leader Harry Reid has been very clear about his initial strategy. At a press conference late last week, Reid announced he’d kick things off next month by holding two votes: one on the GOP plan to extend all the Bush tax cuts permanently, and another on a more progressive-friendly plan to extend all the cuts except for the ones that benefit the wealthiest Americans.

A Senate Democratic leadership aide acknowledged that Reid is fully aware that neither vote is winnable — the idea is to begin the public and private negotiating after putting Republicans on the record as having filibustered middle-income tax cuts.

This perturbed Republicans, who’d rather avoid that vote — but who are strongly united against letting any of the cuts expire next year.

“It’s a very strange way of doing business,” said Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell. “If the point there is to show that neither one has 60 and then work on a compromise, why not start there?”

The question on the Senate side is: What happens after both votes fail? Aides and legislators acknowledge that the top-bracket tax cuts will likely have to be extended for some time, but that the fight will likely center on what the Republicans will offer in return.

“Will they extend unemployment insurance? Will they agree to decouple [middle-income and upper-income cuts]? Our members will want something,” said a senior Democratic aide.

House leadership is all to aware that Reid has no idea what he can and can’t deliver. But though Speaker Nancy Pelosi has fewer obstacles in her way, it’s also unclear what her caucus will agree to, and whether a majority of them can be cobbled together to prevent Republicans from using procedural tricks to force through an extension of the high-income tax cuts.

If Pelosi puts legislation on the floor that would allow the high-income cuts to expire, Republicans would likely counter with a procedural motion that would add additional cuts for wealthy Americans — and they’d have the support of a significant number of Democrats.

One option that’s been under consideration for weeks would prevent the Republicans from pulling any procedural tricks, but it would also require a two-thirds majority for passage. You can read more about that plan here. Importantly, a bill to extend unemployment benefits was defeated in the House last week when it was brought up under the same circumstances and failed to garner supermajority support.

Once a supermajority fails, though, the Democrats will have to come up with something that binds at least 218 of them together. Some options under consideration: create a new tax bracket at $1 million and allow the cuts to expire for income above that level; a brief extension of the top-bracket tax cut, while allowing the rest of the cuts to be extended permanently; and perhaps an extension of unemployment insurance to assuage frustrated progressive House members.

There’s a strong possibility that these two approaches will leave House and Senate Democrats in very different places. Those differences would ultimately have to be resolved before Christmas, or all the cuts will expire. That means Democratic leaders will have to compare notes and reach something approaching a consensus before next week, when Republican and Democratic leaders meet at the White House to try to reach a consensus once and for all.

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