“They’re progressing,” Reid, a Nevada Democrat, said of the talks in an interview as he entered the Capitol this morning. Asked if he thought a deal could be reached today, Reid said, “I really hope so. We’re not there yet, though.”
With taxes set to increase for almost every U.S. worker at midnight, there is still no agreement and gaps between the two parties remain. Republicans and Democrats were narrowing the threshold for tax increases to between $400,000 and $500,000 in annual income.
Senate Minority Leader Mitch McConnell said he and Vice President Joe Biden spoke at 12:45 a.m. and 6:30 a.m. today. As he arrived at his office today, McConnell, a Kentucky Republican, gave reporters no indication of whether there was progress toward a deal.
Talks between Reid and McConnell stalled yesterday because of disputes over income tax rates, the estate tax and other issues. McConnell reached out to Biden in an effort to break the impasse, while staffers worked into the night trading and reviewing offers.
Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, told Bloomberg Television today that the odds of reaching a deal are “a little better than 50-50” while noting that “a lot has to go right.”
SENATE TO RECONVENE
The Senate will reconvene today at 11 a.m. Washington time. Reid said yesterday on the Senate floor that there would “perhaps” be further announcements then. “I certainly hope so,” he said.
Congress is working to avert more than $600 billion in tax increases and federal spending cuts, the so-called fiscal cliff, set to start taking effect tomorrow. Allowing those changes to take effect would cause a recession in the first half of 2013, according to the Congressional Budget Office.
The Standard & Poor’s 500 Index fell 0.3 percent to 1,398.34 at 9:32 a.m. in New York. The benchmark 10-year Treasury bond yield increased two basis points, or 0.02 percentage point, to 1.72 percent at 9:35 a.m. in New York, according to Bloomberg Bond Trader prices.
BUSH TAX CUTS
Tax cuts first enacted during George W. Bush’s presidency are scheduled to expire tonight. President Barack Obama and other Democrats have sought to extend the reductions for married couples’ income up to $250,000 a year while letting tax rates rise for income above that amount. Republicans oppose tax rate increases for any income level.
“The sticking point appears to be a willingness or interest or frankly, the courage to close the deal,” McConnell said on the Senate floor. “I’m willing to get this done, but I need a dance partner.”
Illinois Senator Dick Durbin, the second-ranking Democrat, said unresolved issues include the income threshold at which tax rates would rise, expiring estate tax levels and how to prevent an expansion of the alternative-minimum tax. Democrats, who represent many of the high-tax states where the AMT has the biggest bite, want to permanently limit its reach.
“The AMT is the big question mark here,” he said. “Is it going to be a permanent fix to AMT, which costs $800 billion, or a shorter fix to AMT? This thing haunts us.”
Durbin also said there is a debate over raising the rate for capital gains and dividends from 15 percent to 20 percent. The issue is at what income level the rate would jump to the higher percentage, he said.
According to a person familiar with the talks who asked for anonymity when discussing them, Democrats are pushing for a trigger as low as $250,000 for capital gains and dividends with a tax rate of 20 percent.
Lawmakers haven’t said whether any deal would include provisions to halt a cut in Medicare payments to doctors.
Durbin told reporters yesterday that Republicans had offered to let taxes expire on household income over $500,000. Democrats countered with a $450,000 threshold.
“People are coming around to about a $500,000 threshold,” Senator Kay Bailey Hutchison, a Texas Republican, told reporters.
On the estate tax, Republicans are still asking for 35 percent taxes on estates of $5.12 million. Democrats want a 45 percent tax rate on estates of $3.5 million. The Republican plan would continue current policies; several Democratic senators prefer that approach.