Democrats and Republicans in the U.S. Senate differ more on whose tax cuts should be extended into 2013 than on how large the reduction should be.
The Democratic proposal, scheduled for a vote next week, would cost the government about $272 billion in lost revenue while the Republican plan would cost $301 billion, according to the nonpartisan Joint Committee on Taxation. The $29 billion difference is about 1.2 percent of the government’s projected receipts this year.
The parties differ in two major ways that reflect their priorities. Republicans want to continue income tax cuts for taxpayers at all levels, while Democrats want to let the George W. Bush-era tax cuts lapse for income of individuals of more than $200,000 and married couples exceeding $250,000.
Also, Democrats want to continue tax credits for college tuition and low-income families that were created as part of the 2009 economic stimulus law and extended at the end of 2010.
To Republicans, the Democrats’ willingness to risk expiration of all the tax cuts over what happens at the top of the income scale is misguided.
“The American people deserve better than to have the president and his allies threaten to melt down our economy for what amounts to less than three days of federal spending,” Senator Orrin Hatch of Utah, the top Republican on the Finance Committee and author of the Republican plan, said in a statement.
Democrats are emphasizing Republicans’ reluctance to extend the tax credits for lower-income families while seeking tax cuts for top earners. President Barack Obama has said Congress should pass what it agrees on and fight about the rest after the Nov. 6 election.
“Nobody likes to raise taxes on anybody,” Senator Charles Schumer, a New York Democrat, said today. “But we believe that the highest-income people, it’s better to raise their taxes a little bit and not slash things that help the middle class.”
The expiring tax cuts are part of $607 billion in automatic spending cuts and tax increases scheduled to begin taking effect in January. The House plans to vote on Republicans’ plan the week of July 30.
In its estimates, the Joint Committee on Taxation considered a modified version of the Republican proposal that would prevent the expansion of the alternative-minimum tax for one year. The actual Republican plan, unlike the Democratic alternative, would limit the AMT’s reach for two years.
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