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Tax cuts clear hurdle in the Senate

Obama urged action. By midweek, the bill could head to the House, where opposition is stronger.

WASHINGTON - The Senate overwhelmingly advanced President Obama's $858 billion tax-cut package Monday in a vote that heightened pressure on reluctant House Democrats and enhanced the likelihood of congressional approval for the compromise.

The Senate could send the package to the House by midweek and turn to remaining legislative priorities, including an arms reduction treaty with Russia, a repeal of the ban on openly gay military personnel, and a youth immigration bill.

Still, House Democrats have yet to relent in their opposition to the tax-cut deal between the White House and GOP leaders and are expected to demand changes to an estate-tax provision, which liberal lawmakers say is skewed to the wealthy.

Yet as the Senate voted 83-15 to cross a key procedural hurdle, it became increasingly clear that altering the package in either chamber could delay final votes and risk accomplishing other top goals before the Democratic-controlled Congress comes to a close.

In the Philadelphia area, all senators voted in favor, except Sen. Frank Lautenberg (D., N.J.), who voted against the bill. Eight other Democrats, five Republicans, and one independent also voted no.

Obama urged a speedy resolution. "This proves that both parties can in fact work together to grow our economy and look out for the American people," he said.

The tax breaks passed during the administration of President George W. Bush expire on Dec. 31, and failure by Congress to extend them would lead to a tax increase on nearly every American worker.

Republicans watched the feud between Obama and congressional Democrats, confident they have little at stake if a resolution is not reached in the days ahead. If taxes go up Jan. 1, Republicans believe the president and his party would be blamed. Then, with a GOP majority in the House and greater numbers in the Senate, Republicans could swiftly pass their preferred tax cuts.

Sen. Mitch McConnell of Kentucky, the Senate GOP leader, said the bipartisan package underscored the new direction in Washington after the fall elections. "This is an important shift, and the White House should be applauded for agreeing to it," McConnell said.

The package extends the Bush tax cuts for two years on families at all income levels, including the wealthiest 2 percent who have incomes above $250,000. The package also continues unemployment insurance through 2011 for up to seven million Americans.

One key change for most taxpayers will be a new, 2-point reduction in payroll tax worth up to $2,000. It replaces the so-called Making Work Pay tax cut for 95 percent of Americans, a break that expires Dec. 31.

The package also reinstates the estate tax that lapsed this year. It establishes a 35 percent rate on inheritances beyond $5 million for singles and $10 million for families.

In many ways, the package is a quintessential Washington compromise that leaves lawmakers pleased by some provisions and infuriated by others.

"For all of us, it's a balancing act," said Sen. Charles E. Grassley (R., Iowa), who voted yes. "We want to stay true to our ideals, and we also want to deliver practical results to our constituents."

For example, the Senate added $10 billion in energy assistance, including nearly $5 billion in ethanol and coal credits that environmentalists oppose. But it also included an extension of grants for renewable-energy developers, which supporters credit with having doubled solar-plant production in 2010.

The package also includes a long, $55 billion list of specialty tax breaks that tend to be extended each year - help for Puerto Rican rum-makers, racetrack developers, and Los Angeles film producers.

Democrats remained concerned the package was too heavily tilted toward the wealthy, particularly the $68 billion estate-tax provision. Sen. Carl Levin (D., Mich.) voted against advancing the bill, saying the tax cuts "would exacerbate a growing trend of income inequality in our country."

Sen. Dianne Feinstein (D., Calif.), who voted yes, said: "It's far from a perfect bill, but it's what we have."

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