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December 21, 2014

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Senate to work weekend on tax proposals

Congressional negotiators are still in discussions with the White House, and there’s no approved compromise on the table, but Harry Reid appears to have tired of waiting: he’s keeping the Senate in town for the weekend to take a series of opening votes on taxes, even though they’ll be hard-pressed to pass.

The House of Representatives passed a tax cut extension Thursday that reflects the Democrats’ preferred approach: tax cuts stay in place for incomes of up to $250,000 per household and disappear for anything higher than that.

Now, Reid’s going to have the Senate pick up that bill — along with a few other proposals.

The Democrats’ caucus met Thursday night to try to hash out a compromise to offer Republicans, whereby they would take four tax votes today: two on Democrat-approved proposals and two on Republican proposals.

The roster was expected to include votes on the $250,000-ceilinged House bill and a $1 million-ceilinged proposal presented by Sen. Chuck Schumer for the Democrats’ proposals, and a vote on a permanent full tax cut extension and a five-year extension of the full tax cuts for Republicans.

But Republicans objected, propelling Reid to the Senate floor to file procedural notice that will let him bring up both Democratic proposals Saturday. But because there’s no agreement between the parties, he’s got to get 60 votes for either proposal and it’s not clear where the extra Republican votes are supposed to come from.

While the House passed the $250,000-level tax cut amendment by a vote of 234-188, only three Republicans split off from their caucus to support it. GOP Leader John Boehner called the vote “chicken crap.”

If Republicans in the Senate have the same attitude — which they do, but probably won’t express with quite the same imagery — they’re going to vote against the tax cuts with the expectation that Democrats will be forced to bring up a broader extension of the tax cuts later.

In the unlikely event that Democrats are able to avoid a filibuster on either Saturday proposal, it’s likely not going to be the last word on tax cuts. Democratic leaders don’t want to push forward with an extension of tax cuts for the highest income brackets, but they may have to if they want to get anything else accomplished in the lame duck.

Senate Republicans all signed a letter that said they would block any and all legislation until the tax cuts issue — by which they mean a full extension of all tax cuts — is resolved.

That means there’s going to have to be some deal-making and horse-trading — and it’s likely to start around high-income tax cut extensions and unemployment insurance.

Nov. 30 was the last day that jobless workers could file for a next tier of extended benefits, under the federally funded system that the government approved help the unemployed ride out the recession. Eligibility for checks in the worst-off states rose from 26 to 99 weeks — but thanks to a gap in funding, that’s no longer the case.

Republicans say that unemployment insurance checks can’t be funded unless they are offset elsewhere in the budget; Democrats say funding unemployment insurance should be an emergency venture, obviating the need to make other budgetary cuts. Republicans say that’s fiscally irresponsible when the government has already spent $319 billion on extended unemployment benefits, and would be expected to spend $56.4 billion more over the next year if the system is extended.

But Democrats counter that unemployment checks are a lot better for the economy than the Republicans’ preferred unfunded mandate for tax cuts at higher income levels. That’s projected to cost the government an extra $700 billion over the next ten years and have only a marginally stimulative effect, according to economists, who also estimate that for ever dollar that goes out in unemployment, two dollars go back into the economy.

But the likely marriage between an extension of unemployment insurance and an extension of high-income tax cuts would be politically expedient — especially since many moderate Democrats are also loath to raise taxes on businesses in the short term.

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