The Senate today will vote on a Democratic plan to prevent a scheduled increase in the interest rate on federal student loans. The bill proposes extending the current rate on student loans, and paying for the extension by closing a tax loophole that lets wealthy professionals (such as doctors and lawyers) avoid paying all of the payroll taxes they owe.
Senate Republicans, however, intend to block the proposal from moving forward:
“We’ll defeat cloture,” Kyl said, using the legislative parlance for a key procedural vote scheduled for Tuesday that requires 60 votes to succeed. If Republicans prove Democrats can’t move a bill without GOP support, “I presume leaders in the House and Senate will get together and find a way to ensure the interest rate doesn’t double,” Kyl said.
The tax loophole in question — known as the Edwards Loophole, as it was utilized by former Sen. John Edwards — hurts both taxpayers who have their payroll taxes automatically withheld by their employers and self-employed small-business owners who pay all of the payroll taxes they owe. As Center for American Progress Director of Fiscal Reform Seth Hanlon noted:
The bill takes away the opportunity to recharacterize income from a professional service business to avoid payroll taxes. That solution puts such businesses on par with other kinds of small business owners, who are required to pay self-employment taxes on all of their business income. Closing this tax loophole is a commonsense measure to make people pay what they should be paying already.
Republicans, however, would rather the bill be paid for by gutting a key health care program, making their priorities when it comes to both the social safety net and student loans abundantly clear.
Update
Senate Republicans followed through on their filibuster threat and blocked the bill from moving forward today, by a vote of 52 to 45.
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