Senate sets symbolic vote extending middle-class tax cuts

WASHINGTON (Reuters) - The Democratic-majority U.S. Senate on Wednesday is expected to cast a purely symbolic vote to let some tax cuts for upper income earners expire on December 31.

The Republican-controlled House of Representatives will advance its own symbolic bill next week continuing the cuts for all levels of income.

The votes are designed to appeal to the competing demands of voters in the run-up to the November 6 presidential and congressional elections rather than to actually enact a law.

The real debate and votes on U.S. tax policy likely will play out in the weeks following the elections and before the December 31 scheduled expiration of tax cuts enacted by former President George W. Bush.

The Democratic legislation that is likely to pass advances President Barack Obama's re-election campaign theme that the nation's fiscal and economic woes should be healed with more sacrifice by the wealthy - those making more than $250,000 in adjusted income a year.

Democrats and Republicans have jousted all year over the idea, with Republicans arguing it would simply choke off small business and job growth at a time of high unemployment.

But Senate Majority Leader Harry Reid, a Democrat, argued, "The majority of Americans ... agree taxes should remain low for the middle class and the top 2 percent should pay their fair share to reduce the deficit."

Under the Democrats' bill, tax cuts enacted by Bush would be extended through 2013, except on some income of the highest earners.

Income beyond the $250,000 threshold would be taxed at either 36 percent or 39.6 percent. That would be up from the current 33 percent and 36 percent for the top two income groups.

The Democratic bill is estimated to raise about $50 billion a year at a time of federal budget deficits that have been topping $1 trillion annually.

The Senate on Wednesday also is scheduled to vote on a Republican alternative, which includes the top earners in a one-year extension of all Bush-era tax cuts.

The way Congress is spending its time during this election year, accumulating political bragging rights rather than legislative achievements, was underscored by the fact that the Senate does not even have the power under the Constitution to originate a tax measure as it is doing.

Under the Constitution, legislation raising revenue, such as this middle-class tax cut bill, can only originate in the House.

The result will be that the House will "blue slip" the Senate bill, or kill it.

"Ordinarily, Republicans would do everything we can to keep a plan as damaging as the Democrats' plan from passing," Senate Minority Leader Mitch McConnell said. "The only reason we won't block it today," he added, "is that we know it doesn't pass constitutional muster and won't become law, because it didn't originate in the House."

But Democrats saw less lofty reasons for Republicans letting the two bills go forward on simple majority votes, instead of erecting procedural delays that require super majority, 60-vote thresholds.

A Senate Democratic aide speculated that Republicans were getting nervous about voting against extending the middle-class tax cuts too close to the November 6 elections and had to find a way to quickly bring the two competing bills to the floor, giving everyone political cover.

(Editing by Vicki Allen)