Senate Democrats are seeking to set the top tax rate ondividends at 23.8 percent, almost 20 percentage points lower thanthe proposal offered by President Barack Obama in his budget.

That detail, along with a top estate tax rate of 45 percent anda one-year patch to prevent the alternative minimum tax fromaffecting millions more families, are part of the written versionof Senate Democrats' attempt to extend expiring income tax cuts forone year. The core of the proposal would extend the George W.Bush-era cuts through 2013 for 98 percent of households whileletting them expire on income above $200,000 for individuals andabove $250,000 for married couples.

A Senate Democratic aide, who spoke on condition of anonymity,confirmed the details. Senate Majority Leader Harry Reid, a NevadaDemocrat, said last week that the Senate will vote before theAugust recess.

Obama has made his push for a tax-cut extension for all but thehighest-income families a central theme in his presidentialcampaign last week. He has been asking Congress to send him theplan for his signature as soon as possible.

“Let's skip the unnecessary drama, the needless delays and allthe partisan posturing and let's just do the right thing for thepeople who sent us here to serve,” Democrat Obama said in hisweekly radio and internet address.

Aside from the lack of bipartisan support preventing action,until now there hasn't been a version of Obama's plan inlegislative form.

When asked about his ability to get a majority of the Senate tosupport Obama's plan, Reid expressed confidence.

“One of the things I'm pretty good at around here is countingvotes, so I don't think anybody has to worry about that,” he saidJuly 12.

Democrats control 53 votes in the 100-seat Senate, andRepublicans oppose the Democrats' plan because it doesn't extendall of the expiring tax cuts. High-income taxpayers, they note,often pay taxes on their business income on their individualreturns.

Two members of Reid's caucus, Jim Webb, a Virginia Democrat, andJoe Lieberman, a Connecticut Independent who caucuses withDemocrats, have said publicly they will oppose the measure, meaningnearly all of the rest of the chamber's Democrats would have tosupport the bill if it is to garner a majority vote.

Senator Jon Tester, a Montana Democrat who is in a toughre-election race this year, will support the bill, Tester'sspokeswoman, Andrea Helling, said in an e-mail. Missouri SenatorClaire McCaskill, another Democrat in a difficult race this year,has said she supports Obama's tax plan.

Raising Taxes

“Raising taxes on job creators during a jobs shortage makesabout as much sense as cutting off the water supply during adrought,” Senator Rob Portman of Ohio said in the weekly Republicanaddress.

If Congress doesn't act, tax rates on ordinary income, capitalgains, dividends and estates would all increase in 2013. Thepotential changes are part of the $607 billion so-called fiscalcliff of automatic spending cuts and tax increases that theCongressional Budget Office has warned could push the country intoa recession.

The proposed bill would set the basic top rate at 20 percent forboth capital gains and dividends. The 2010 health care law includedan additional 3.8 percent tax, yielding the 23.8 percent rate. Inhis 2013 budget, Obama called for taxing dividends as ordinaryincome, subjecting them to a top rate of 39.6 percent and the 3.8percent surcharge for a 43.4 percent total.

Obama's previous budgets had included the 20 percent rate ondividends.

On the estate tax, the Democratic proposal would set a $3.5million per-person exemption and a 45 percent top rate, the sameproposal Obama had made in his budget. That's less generous toestates and heirs than the current rules, which have a $5.12million exemption and a 35 percent top rate.

In 2010, Obama signed a law that extended the income tax cutsand set the estate tax at the current levels.

The change back to the estate tax rules that had been in effectin 2009 would increase the number of taxable estate tax returns toat least 7,000 from 4,000 in 2013, according to the Tax PolicyCenter, a nonpartisan research group in Washington.

The alternative minimum tax is a parallel tax system that wasoriginally designed to prevent high-income taxpayers from usinglegal deductions and credits to eliminate their tax liability. Theexemption in that system isn't indexed for inflation. If Congressdoes nothing, the AMT would affect 31.2 million households in 2012,up from 4.3 million in 2011.

The Democrats' bill would limit the AMT's reach for the 2012 taxyear. It wouldn't affect the 2013 tax year.

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