Senate passes tax cut extension

The U.S. Senate passed the Middle Class Tax Relief Act of 2010 today by a vote of 81-19. It now goes to the House of representatives, which could take up the matter as early as today.

The bill, for the most part, mirrors the deal President Obama struck earlier last week with Republican leadership for extending the Bush-era tax cuts for all citizens and unemployment insurance for millions of out-of-work Americans.

The $900 billion bill extends the tax cuts for all income brackets for two years and sets the estate tax at 35 percent with a $5 million exemption.

The Democrats had originally planned to extend the tax breaks only for people making under $250,000 a year. But Senate Republicans threatened to use their filibuster power to block all legislation Democrats may attempt in this lame duck session, unless the tax break was extended for America's wealthiest citizens as well.

The bill provides a 13-month extension of unemployment insurance benefits wanted by Democrats, and an extension of the ethanol tax credit, which is supported by both sides.

The measure also includes extensions of the American Opportunity Tax Credit for college tuition, the Child Tax Credit and the Earned Income Tax Credit, and a $120 billion payroll tax reduction for workers.

The bill must still pass the House, which last week rejected a similar bill. The House could take up the measure as early as later today.

Some House democrats are talking about amending the bill. Republicans are warning that too much change may lose their support. House Democratic leadership is telling its members that compromise is the only way. President Obama is telling House Democrats that this compromise is the only way to ensure that middle-class Americans don't get walloped with higher taxes, and millions of them don't get stranded without unemployment insurance.