Yesterday, after months of debate, the House of Representatives approved one of President Obama's campaign promises, to fully extend the Bush tax cuts for the 98 percent of taxpayers who are either married couples with adjusted gross income (AGI) below $250,000 or unmarried taxpayers with AGI below $200,000.
The bill, H.R. 4853, passed by a vote of 234-188, with only 3 Republicans voting in favor and 20 Democrats voting against.
House Republicans, despite their history of supporting tax cuts as a solution for every known problem, voted en masse against the bill, which extends the Bush income tax rate reductions for the first $250,000 of a married couple's income and the first $200,000 of a single person's income.
Democratic leaders in the Senate have scheduled a vote for Saturday on a bill introduced by Finance Committee Chairman Max Baucus that is also essentially based on Obama's tax plan. It is likely that all or nearly all of the 58 Senate Democrats will vote in favor of this bill.
But Republicans in the Senate threaten to filibuster Obama's tax plan because it only partially extends tax breaks for the richest two percent of taxpayers. Republican leaders have demanded a full extension for all taxpayers.
In other words, Republicans threaten to hold hostage a full extension of the tax cuts for 98 percent of taxpayers in order to protect tax cuts for the richest two percent.
While threatening to block consideration of tax bills not to their liking, Senate Republicans simultaneously refuse to proceed to any other legislation until the tax cuts and pending spending measures are dealt with. In the recent letter signed by all 42 Senate Republicans, the caucus promised to prevent the chamber from even debating any legislation until this happens.
The letter itself makes wildly inaccurate statements about tax cuts, which are refuted by CTJ's recent report on small businesses and tax cuts.
President Obama has taken the unfortunate tactic of negotiating with Republican Congressional leaders before Congress even attempts to vote on his original tax plan. Formal negotiations are taking place between OMB Director Jack Lew, Treasury Secretary Timothy Geithner, and Congressional leaders.
Democratic leaders in Congress want to at least demonstrate that their party favors allowing the tax cuts for the richest 2 percent to partially expire and force the Republicans to explain why they would block a full extension of tax cuts for the other 98 percent.
If the two parties eventually come to a compromise, it is possible that it would involve an extension of the expanded unemployment program, which just expired, through the end of next year. Most economists agree that jobs will remain scarce well into next year and that UI benefits are effective economic stimulus because they put money in the hands of those most likely to spend it right away.