Senate Democrats are warning that they will not agree to a deal to stop across-the-board spending cuts early next year (sequester) without new revenue gained by ending tax breaks on the wealthiest Americans. To that end, they circulated a draft bill yesterday that would spare most Americans from higher tax rates that are due to take effect on January 1, 2013, but the bill would allow the Bush tax cuts to expire on annual household income greater than $250,000 and raise the rate on dividends and capital gains from the current 15 percent to 20 percent. The Senate will vote before the August recess on the Democrats’ tax bill, which also would preserve current tax rates on household income under $250,000 and individual income under $200,000. The House Republicans plan their own vote this month to extend all of the Bush-era tax cuts. But the votes in both chambers will be symbolic, as neither party will be able to get the 60 votes needed to advance its plan in the Senate.
Both measures are seen as “lines in the sand” for the big negotiation that will take place after the November elections during the “lame duck” session that will include new rounds of negotiations on the many large fiscal issues facing the country, including the broad array of expiring tax cuts and automatic across-the-board spending reductions known as the sequester.
Indeed, US Senator Patty Murray (D-WA) said Monday her party would allow ALL current tax rates to expire on December 31strather than accept a deal with Republicans for averting the sequester that doesn’t include additional revenue from more affluent Americans. “If we can’t get a good deal, a balanced deal that calls on the wealthy to pay their fair share, then I will absolutely continue this debate into 2013, rather than lock in a long-term deal this year that throws middle-class families under the bus,” Murray said in a speech yesterday.
Read more key excerpts from Murray’s speech.