The top Senate tax writer predicted Democrats in the chamber will back President Barack Obama’s latest push to extend part of the Bush-era tax cuts, calling talk of Democratic dissension “background noise.”

Max Baucus

Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said he agreed with the case Obama made yesterday to keep the tax cuts first enacted in 2001 and 2003 for families making less than $250,000 a year and let them expire for those with income exceeding that threshold.

Baucus brushed aside the idea that Senate Democrats would insist instead on a proposal by Senator Charles Schumer of New York to extend the tax cuts for those with income up to $1 million.

“Oh, we’ll work that out,” Baucus said today in an interview in Washington. “That’s background noise.”

Any opposition by Democratic lawmakers, including those from states such as New York and New Jersey where a greater share of taxpayers would be affected by Obama’s threshold, may muddle the party’s effort to emphasize differences with congressional Republicans and presidential candidate Mitt Romney before the Nov. 6 election.

“I support the proposal,” Baucus said, referring to Obama’s plan.

In December 2010, Obama agreed with congressional Republicans to extend the tax cuts for all income levels for two years. That month, the Democratic-controlled Senate rejected two proposals to let the tax cuts expire for higher earners, one with a $250,000 threshold and the other at $1 million.

Three Democrats
Three current Senate Democrats—Joe Manchin of West Virginia, Ben Nelson of Nebraska and Jim Webb of Virginia—voted against the $250,000 threshold, as did Connecticut’s Joe Lieberman, an independent who caucuses with Democrats.

U.S. Treasury Secretary Timothy Geithner met with Senate Democrats during a closed-door lunch today to make the case for Obama’s tax proposal.

Republicans say some Democrats may balk at supporting a tax increase for high earners in an election year.

“When Democrats look at the facts in their particular state, they get nervous about voting for something just on political grounds, when there are a lot of people in their own state who can be hurt by it,” Arizona Senator Jon Kyl, the Senate’s second-ranking Republican, said in an interview.

Following Obama’s remarks yesterday, Senate Majority Leader Harry Reid, a Nevada Democrat, said in a statement that the chamber will vote on the president’s plan “in the weeks ahead.”

Republican Amendment
The Senate’s top Republican, Mitch McConnell of Kentucky, told reporters today that Republicans would seek to attach an amendment extending the Bush tax cuts for all income levels to a small-business tax credit measure the Senate plans to consider this week.

The Republican-controlled House plans to vote later this month on a measure to extend the tax cuts for all income levels for a year and set in motion a process that would lead to a more comprehensive tax-code overhaul in 2013. That bill isn’t expected to advance in the Senate, where Democrats have a majority.

If Congress doesn’t act, the tax cuts passed during former President George W. Bush’s first term and extended by Obama and Congress in 2010 would expire at the end of this year. The top tax rate for ordinary income would increase to 39.6 percent from 35 percent. The top rate on capital gains would increase to 23.8 percent from 15 percent, and dividends would be taxed as ordinary income.

A one-year extension of the expiring tax cuts for all income groups would reduce projected federal revenue by $426 billion, and tax cuts for those above the $250,000 threshold make up $68 billion of that total, according to an analysis by the nonpartisan Joint Committee on Taxation that was provided to Senate Finance Committee Republicans.

www.bloomberg.com

--With assistance from Richard Rubin, James Rowley and Margaret Talev in Washington. Editors: Laurie Asseo, Jodi Schneider

To contact the reporter on this story: Kathleen Hunter in Washington at khunter9@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net