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Democrats Squabble Over Taxes

Clarification Appended

Rather than wasting time comparing notes on how they spent their summer vacations, Senate Democrats celebrated their first full day back at work Tuesday by fighting over whether and how to extend expiring Bush-era tax cuts.

Democratic Senators and aides said their regular Tuesday lunch turned into a free-for-all over how to tackle an issue that has rarely cut in Democrats’ favor and has some Senators nervous given that the majority expects to sustain substantial losses in both chambers come Nov. 2.

Even though public polls show a majority of Americans agree with President Barack Obama’s plan to extend only middle-class tax cuts, there are still a handful of nervous Democrats who want to avoid being accused of raising taxes on individuals making more than $200,000 a year and couples making more than $250,000.

Sources said opinions at the lunch varied between Senators who do not want to vote on taxes before the elections and those who think a vote is essential to draw a pre-election contrast with Republicans, even if there isn’t much expectation that they will be able to pass a bill until the lame-duck session. Senators also differed on whether to pursue a simple, permanent extension of middle-class tax cuts or to bring up a compromise that would extend higher-income tax cuts for a year or two. At least five Democrats have said they want to extend all of President George W. Bush’s tax cuts.

“People are on both sides on when to do it,” Sen. Bob Casey (D-Pa.) said.

Sen. Sheldon Whitehouse (D-R.I.) said no consensus emerged from the meeting.

“This is our first time back together since the recess, and it was an opportunity for people who have different points of view about what we should be doing in this period, including on Bush tax cuts, to share their point of view,” Whitehouse said. “I think it was, from the leadership’s point of view, a listening session, and then decisions will get made. But in the Senate it’s important … that everybody have a chance to be heard out before decisions are made.”

One senior Senate Democratic aide agreed with Whitehouse, saying Majority Leader Harry Reid (D-Nev.) “wanted to get the venting of the spleen out” before he made any decisions on how to move forward.

[IMGCAP(1)]Reid spokesman Rodell Mollineau acknowledged the caucus has some differences but said it is united on the most important point of discussion.

“Regardless of what anyone might think about tax cuts for the wealthy, all Democrats are unified on cutting taxes for middle-class families and small businesses,” he said. “Republicans need to answer the question: Do they care so much about tax cuts for the wealthy that they would force a tax hike on the middle class?”

Most Democratic leaders think they have a potentially winning issue if they can successfully blame Republicans for blocking middle-class tax relief in order to secure tax breaks for the wealthy. Doing so, however, will require them to have a legislative floor plan, which they acknowledged Tuesday they do not yet have.

Reid indicated Tuesday that at least the issue of timing is settled. “We’re going to have a procedure during this period of time,” said Reid, who noted that he has been in talks with Minority Leader Mitch McConnell (R-Ky.) on a way to bring the issue to the floor during this work period.

He said the debate would come down to two issues: “One is taking care of the middle class and the other is taking care of the millionaires.”

Though some Senate Democrats have argued that Democrats should alter Obama’s plan by extending tax cuts for those who make up to $500,000 or $1 million, Senators and aides said it’s unlikely Reid would bring such a bill forward.

“I think the policy should be to extend the middle-income tax cuts to help us get out of this recession,” Senate Finance Chairman Max Baucus (D-Mont.) said.

Baucus and others also rejected the idea of putting off a vote until after the elections.

“You can’t leave here without having a vote on this, in my view,” Sen. Chris Dodd (D-Conn.) said. “Otherwise you are going to get the question of, well, you left town before the election and you let them expire.”

Dodd said the president’s proposal is the right message.

“I think we’ve got to vote on that. Whether you’re going to win it or not, you’ve got to vote on that.”

Baucus, however, came out strongly against one potential compromise: a one-year extension of the Bush tax cuts. He said that would continue uncertainty in the market about what tax rates would be and simply keep Senators from making tough decisions now.

Senators said the fickle electorate could change the way Senators view the tax issue in Tuesday’s primaries, particularly if they spell more bad news for Democratic electoral prospects this year.

“It might sort of depend on the primary elections today,” Baucus said. “Who wins some of these primaries might have some effect on the upcoming general election. So I’m just saying, we’re in a very volatile, unpredictable time.”

Besides the policy dispute within his caucus, Reid is also under pressure to cut short the planned four-week session. Senators are eager to return home by early October, especially those who are up for re-election, Sen. Tom Carper (D-Del.) said. However, Reid indicated Monday that Oct. 8 is the date for adjournment, and senior aides said the workload will likely keep the Senate in town until then.

Senate Democrats plan to keep discussing what to do Thursday, but another senior Senate Democratic aide said Reid would likely have to give Republicans an opportunity to vote on their plan to extend tax cuts for upper-income earners. However, it remains to be seen whether the votes will come on separate bills or on amendments to a Democratic bill.

McConnell on Tuesday reiterated that Republicans are united against raising taxes on the rich because they believe it would affect as many as 750,000 small businesses.

“What we ought not to be doing is raising taxes on anybody in the middle of a recession. We know that there’s bipartisan agreement with that,” McConnell told reporters.

One senior Senate GOP aide said Republicans believe they have the upper hand. “We’re not the ones arguing amongst ourselves,” the aide said. “The GOP is in battle mode a la [the] health care fight.”

Clarification: Sept. 15, 2010

The article stated that Senate Finance Chairman Max Baucus (D-Mont.) voiced opposition to a one-year extension of President George W. Bush’s tax cuts for the wealthy. His office clarified that he was referring to a one-year extension of all of the Bush tax cuts, not just those for the wealthy.

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