By Susan Ferrechio
Chief Congressional Correspondent
The Senate on Thursday voted down a proposal to permanently extend the Bush income tax cuts set to expire Jan. 1, in a vote forced by Republicans on an issue that promises to be politically explosive.
The vote was on an amendment attached to the federal aid bill, and was typical of a tactic by the GOP to keep the issue alive by forcing lawmakers to take a position on the tax cuts before Congress takes up the issue in earnest in the fall.
Senate Majority Leader Harry Reid, D-Nev., intends to bring a tax legislation to the floor in late September, according to his aides.
While the fight is weeks away, it is having an influence now. A bill deemed critical for helping small businesses weather the weak economy has stalled in part because Reid did not want Republicans loading the bill with tax-cutting amendments that Democrats would have to vote against.
The amendment defeated Thursday was introduced by Sen. Jim DeMint, R-S.C., who argued that raising taxes would be particularly devastating for small businesses that use profits to buy more equipment and hire more workers.
While Democrats support the idea of continuing Bush's tax cuts, most want to end them for the upper income bracket -- those earning above $200,000 individually or $250,000 jointly.
"If we left the tax rates the same, it would do more to help small businesses in American than any of the bailouts or targeted programs my Democratic colleagues are talking about," DeMint argued before the vote.
DeMint managed to pick up two Democratic votes, Sens. Ben Nelson of Nebraska and Blanche Lincoln of Arkansas.
Lincoln and Nelson also voted for a DeMint amendment offered on a different bill last month to permanently repeal the estate tax.
In addition to Nelson and Lincoln, there are several Democratic senators who have voiced support for extending the cuts to every income bracket, at least temporarily, including Evan Bayh of Indiana and Budget Committee Chairman Kent Conrad of North Dakota.
"I don't think jiggering around with the current tax code is frankly worth a lot of time and attention, because this tax code is so broken," Conrad told The Washington Examiner. "I would do a temporary extension and then do fundamental tax reform because I think that is what the nation needs."
Conrad said he would be willing to vote to extend just the lower tax brackets' cuts, but Nelson and Lincoln, who is facing a tough re-election fight, may not be persuaded.
Lawmakers and leadership aides believe Reid will have to settle on a compromise to get the needed 60 votes. Under one likely scenario, Democrats would draft a bill to permanently extend the tax cuts for the lower income brackets and provide a one-year extension for the nation's top earners.
Sen. Orrin Hatch, R-Utah, said he believes Democratic senators will not be able to come to an agreement this fall on how to permanently deal with the Bush tax cuts.
"They'll kick the system down the road, by just keeping them going," Hatch said. "For at least a year."