Harry Reid, John Ensign clash as Democratic tax plans blocked

By Karoun Demirjian

Saturday, Dec. 4, 2010 | 9:17 a.m.

WASHINGTON -- It’s back to the drawing board on taxes today after the Senate tried — and failed — to pass Democrat-drafted measures to extend tax cuts and unemployment insurance into the next year.

Majority Leader Harry Reid held the Senate in town Saturday morning to take votes on two tax proposals: an extension of tax cuts on the first $250,000 of income and an extension of tax cuts on the first $1 million of income.

Both went down on procedural votes that picked up 53 “yea” votes, but failed to gain the support of the 60 senators needed to avoid filibuster. Republicans held rank, and were joined in their opposition by a handful of Democrats.

Nevada's senators, as expected, came down about as much on opposite aides of the vote as possible.

"Democrats are fighting to protect middle-class families every way we can," Reid said. "But Republicans cannot stop protecting the people who got us into this mess long enough to do a common-sense thing like cut taxes for the middle class."

Republican John Ensign saw it differently.

"Today we witnessed that political stunts are still alive and well on the floor of the United States Senate," Ensign said. "By setting arbitrary income limits on tax relief, our nation's job creators will be forced to suffer under increased taxes; greatly limiting their ability to create jobs for the many unemployed people across our country."

The first proposal, tax cuts to $250,000, represents the president’s preferred plan; the $1 million was a compromise divined by New York Sen. Charles Schumer and supported by a group of moderates, who say the $1 million threshold will obviate disagreements over who counts as middle class by only raising taxes on millionaires and billionaires.

Republicans objected, saying that raising taxes on anybody during the midst of a recession was a recipe for killing jobs.

The fight over extending tax cuts and unemployment entitlements has grown to a fever pitch in the face of a soaring deficit. A report approved Wednesday by Obama’s bipartisan Debt Commission appointees recommended draconian cuts to social entitlement programs, hikes in taxes and other reductions in spending to bring down the country’s debt levels. Democrats and Republicans alike have called the deficit the single largest threat to national security.

But in this debate, they have very different opinions of what merits belt-tightening — and what is too important to worry about budgeting.

Democrats have been pushing a capped-at-$250,000 tax extension by saying the $700 billion they will save by not including upper income levels can go directly into debt reduction. No tax cut plan currently on the table, Republican or Democrat, contains offsets for the tax cuts it seeks to extend.

Republicans, on the other hand, have refused to approve plans that don’t offset extended unemployment insurance payments, expected to cost about $56 billion over the next year.

Democrats have been quick to point out the apparent hypocrisy in the Republicans’ proposal. “Could you please explain to me why we can extend tax cuts to those making over a million without paying for it, while extending unemployment benefits must be paid for?" Schumer asked prior to Saturday’s vote.

It’s clear though, that the seemingly intractable fight over these tax breaks is only the tip of an iceberg of a much more existential disagreement over tax policy in general.

Several lawmakers spent the hours Saturday morning prior to the vote bickering about the merits of the existing progressive tax system: with Democratic-leaning independent Bernie Sanders of Vermont asking “isn’t it enough” that the top 1 percent of the country takes home almost a quarter of the nation’s income, and Republican Lindsey Graham of South Carolina questioning the fairness of a system where nearly half of all households avoid paying any income tax at all, and the top 1 percent of wage-earners pay 40 percent of the taxes.

In light of Saturday’s failed votes, the House’s passage earlier this week of a $250,000-level tax cut bill is rendered no more relevant than a political statement, leaving the best hope for resolution on taxes and lapsed unemployment benefits in the hands of a quartet of congressional negotiators and the White House’s top financial minds. The group, formed Tuesday, has met three times this week, but has not emerged with a proposal.