The tax extender and unemployment benefits bill failed to clear a 60-vote hurdle in the Senate on Wednesday.
Judd Gregg, R-N.H., ranking member of the Senate Budget Committee, raised a budget point of order against the $140 billion bill. Republicans claim it would raise the budget deficit by $79 billion to $80 billion over a decade. The Senate then voted 45-52 in opposition to waiving the budget rules for the bill, falling far short of the 60 votes needed to advance the American Jobs and Closing Tax Loopholes Act of 2010. Eleven Democrats, 40 Republicans and one independent voted against advancing the bill.
The bill, sponsored by Senate Finance Committee Chairman Max Baucus, D-Mont., has already scaled back provisions that would raise taxes on carried interest for hedge fund managers, private equity firm partners, venture capitalists and real estate investment partnerships (see Senate Modifies Carried Interest Tax Provision). A revised version of the bill introduced last week would tax only 65 percent of their earnings at ordinary income rates, as opposed to 75 percent in the House version of the bill, and increase the amount taxed at capital gains rates from 25 to 35 percent.
The American Institute of CPAs and the National Society of Accountants also have written to Baucus and other Senate leaders opposing another revenue-raising provision that would change the tax treatment of self-employment taxes for S corporation partners (see Accounting Groups Protest S Corp Tax Hike).
Baucus and Senate majority leader Harry Reid, D-Nev., are reportedly working on scaling back the cost of the package, perhaps by eliminating a $25 boost in weekly unemployment benefits that was in the stimulus legislation. The Senate bill, like the version passed last month by the House, would extend unemployment benefits through the end of November. The revised bill may also scale back the doc fix provision that would prevent a 21 percent cut in Medicare physician payment rates.
An alternative Republican version of the tax extenders bill was introduced as an amendment last week by Sen. John Thune, R-S.D., and could also influence the final legislation. "My amendment would eliminate harmful tax increases and wasteful spending included in the Democrats' bill, he said in a statement.
Thune claimed his amendment is fully paid for, and would reduce the deficit by $55 billion, according to the Congressional Budget Office. His amendment would extend the expiring unemployment provisions until November and extend $32 billion in expired tax provisions that lapsed at the end of 2009, including the tax credit for research and development and the state and local sales tax deduction through the end of the year.
The Thune amendment would drop many of the controversial tax increases, along with $24 billion in aid to states. However, it would also rescind $38 billion in unobligated stimulus funds, collect the unpaid taxes of federal employees, freeze federal employees salaries and cap their numbers, impose a 5 percent across-the-board cut in government spending for all agencies except Veterans Affairs and the Department of Defense, and create a new deficit-reduction trust fund in which rescinded balances and moneys saved through the amendment would be deposited for the purposes of paying down the federal debt.
Baucus spoke out against the Thune amendment on Tuesday, saying, I support finding ways to make our government more efficient, but these cuts are arbitrary. They are inappropriately restrictive.
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