Democrats, Republicans may extend tax rates, jobless aid

WASHINGTON – Their political options limited, Democrats and Republicans appeared to unite Sunday behind the outlines of an economic package that would temporarily extend expiring tax rates to all taxpayers as well as jobless benefits for millions of Americans.

Differences remained over details, and some Democrats continued to object to any plan that would continue Bush-era tax rates at the highest income levels.

Without action, however, Congress faced the prospect of letting the tax rates revert to higher pre-2001 and 2003 levels, and delivering a tax hike to all taxpayers. Negotiations between the Obama administration and a bipartisan group of lawmakers centered on a two-year extension of current rates.

At the same time, Friday’s jump in the unemployment rate to 9.8 percent added pressure on Republicans to accede to President Barack Obama’s demand that Congress extend unemployment insurance for a year. A deal could be reached this week.

“I think most folks believe the recipe would include at least an extension of unemployment benefits for those who are unemployed and an extension of all of the tax rates for all Americans for some period of time,” said Sen. Jon Kyl of Arizona, the Senate’s Republican negotiator in tax talks between lawmakers and the Obama administration.

“Without unemployment benefits being extended, personally, this is a nonstarter,” said Sen. Dick Durbin of Illinois, the second-ranking member of the Senate Democratic leadership.

Republicans have insisted that any extension of jobless aid be paid for with cuts elsewhere in the federal budget. The White House opposes that, saying such cuts are economically damaging during a weak recovery. Senate Republican leader Mitch McConnell on Sunday said that “all of those discussions are still under way.”

But Sen. Orrin Hatch, R-Utah, said Republicans would likely cede that point to the Democrats.

“Let’s take care of the unemployment compensation even if it isn’t … backed up by real finances,” Hatch said. “We’ve got to do it. So let’s do it. But that ought to be it.”

About 2 million unemployed workers will run out of benefits this month if they are not renewed, and the administration estimates 7 million will be affected if they are not extended for a year.

The White House, however, also wants to include renewal of several other tax provisions that are expiring. They include a tax credit for lower- and middle-class wage earners, even if they don’t make enough to pay the government, and breaks to offset college tuition and breaks for companies that hire the unemployed.

Any deal would require the approval of the House and Senate, and the president’s signature. Obama told Democratic congressional leaders Saturday that he would oppose any extension of tax rates that did not include jobless benefits and other assistance his administration was seeking.