WASHINGTON — Senate Democratic leaders are closing in on a $120 billion package of tax increases on the affluent and targeted spending cuts that they say would be large enough to put off looming, across-the-board spending cuts to defense and domestic programs for 10 months.
The package combines a new 30-percent minimum tax rate for income over $1 million with new limits on tax incentives for retirement once retirement saving reaches a certain level. The legislation would also eliminate some subsidies to agribusinesses and retain some targeted defense cuts, according to aides familiar with the plan, which they emphasized could still be changed. Senate Democrats will hash over the package Tuesday, hoping to formally unveil their plan to put off the automatic cuts by Thursday, just two weeks before cuts of 6 to 9 percent kick in March 1.
Congressional Republican leaders have said they will not accept any tax increases to shut off the so-called sequester, which would cut spending by close to $1 trillion over 10 years. Sen. Mitch McConnell of Kentucky, the Republican leader, said Monday that the Democratic plan was designed to fail as a precursor to an onslaught of attacks from President Barack Obama designed to pin the cuts on Republicans.
“The time has come to finally take on Washington’s spending problem in a bipartisan way, and that means the president will actually have to move beyond the gimmicks and the taxes and propose real spending cuts,” McConnell said on the Senate floor, “because, I assure you, my constituents in Kentucky will not accept a tax hike in place of spending cuts already agreed to by both parties — I suspect none of our constituents would.”
The Democratic leadership package is considerably more restrained than what many liberals wanted. On Monday, Sen. Carl Levin of Michigan, chairman of the Senate Armed Services Committee, and Sen. Sheldon Whitehouse, D-R.I., introduced a more sweeping sequester-replacement bill that would close corporate tax loopholes worth more than twice the tax measures in the leadership plan.
Senate Democratic leaders also dropped plans to include provisions ending tax breaks for oil and gas companies. Aides familiar with the package said those provisions would divide Democrats, including Sens. Mary Landrieu of Louisiana and Mark Begich of Alaska, both of whom are running for re-election next year in states heavily dependent on oil exploration.