While conservatives and moderates in the House were at odds over a budget bill in the House, a similar dynamic unfolded in the Senate Finance Committee on Thursday. Senator Olympia Snowe (R-ME) refused to support a $68.8 billion tax bill that included cuts to the capital gains and stock dividend tax rates. The current provisions on capital gains and dividend rates are scheduled to expire at the end of 2008 and more than half of the benefits flow to millionaires. The vast majority of the benefits of the tax break go to households earning more than $200,000.
Senator Snowe was unwilling to support a provision extending the investment break just one week after the Senate approved a $35 billion bill cutting Medicaid, Medicare and other programs. In the face of such opposition, Senate Finance Committee Chair Charles Grassley (R-IA) offered to write a tax cut bill aimed at middle-class taxpayers and which lacked the investment tax breaks. But conservatives on the panel, including Jon Kyl (R-ID) and Michael Crapo (R-ID) do not want a tax bill unless it offers the breaks for millionaires.

The nearly $70 billion in tax breaks developed by Chairman Grassley are phase two of the Congress’ budget plan. The first phase – deep cuts to government programs – was agreed to by the Senate last week but has not yet been passed by the House.

If the Senate Finance Committee is not able to approve a tax cut bill at this time, they may wait until the House Ways and Means Committee approves a bill. The Senate could take that bill straight to the Senate floor, bypassing the Finance Committee and Senator Snowe.

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