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Washington's Tax Compromise May Raise Reconciliation Possibility

Under reconciliation rules, Congress can pass a joint budget resolution and then subsequent legislation without a threat of a filibuster in the Senate. Reconciliation was key to enabling congressional Democrats and President Bill Clinton to pass a tax increase in 1993 without a single Republican voting in favor of the legislation (PL 103-66). Democrats again contemplated using the tactic to extend middle-income tax cuts and eliminate upper-income tax breaks when they were scheduled to expire in 2010. But the rule against adding to the deficit beyond the 10-year budget window was one reason they decided against the strategy, a Senate Democratic aide said this week.

Now, as in 1993, a bill that is viewed as a tax increase by many lawmakers would also be seen as a tax increase by the CBO. It could therefore be freely considered under reconciliation rules, enabling it to be passed by the Senate with only 51 votes instead of the 60 normally needed to limit debate on a measure.

The procedural hurdles are separate, however, from the political hurdles. The prospect of passing a tax increase through reconciliation does not seem to have factored into the thinking of Democrats who helped write the compromise tax package. To even consider the maneuver, Democrats would first need to gain control of the House, where Republicans currently hold a 33 seat advantage.

For now, Democrats are focused on raising additional revenue by scaling back tax breaks and using the money to partially replace across-the-board discretionary spending cuts scheduled to take effect on March 1.

Republicans have vowed to resist any more tax increases. They argue that the appropriate level of tax revenue has been settled and that only alternative spending reductions are an appropriate way to turn off the sequester.

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