Republicans said the measure was all about Democratic posturing for the upcoming elections.
"Thank goodness it's not going anywhere because it would be bad for the economy, the single worst thing we could do to the country," Senate Minority Leader Mitch McConnell, R-Ky., said.
Republicans were hoping that several Democrats seeking re-election would hurt their candidacies by having backed the Democratic package. The bill would dramatically boost the estate tax, which would be widely unpopular in farming, ranching and high cost-of-living states, and increase levies on dividends and capital gains, which are relied on by many elderly people.
"That's what today's votes are all about," McConnell said in a thinly veiled warning to Democrats. "Showing the people who sent us here where we stand."
Illustrating the potential high-voltage political impact of the vote, Sen. Claire McCaskill, D-Mo., who is in a tight re-election race, announced she had introduced a bill preventing the estate tax from rising next year, and Tester co-sponsored it. She issued a news release to that effect just minutes after voting for the Democratic bill, which would let estate taxes go much higher in 2013.
Under the Democratic measure, individuals earning over $200,000 and couples making at least $250,000 would see their top rates on those earnings rise from 33 percent and 35 percent today to 36 percent and 39.6 percent in January.
That increase would affect 2.5 million households, or 2 percent of all 140.5 million tax returns, according to 2009 Internal Revenue Service statistics.
The White House said that if the tax cuts were not continued, middle class families would face average tax increases next year of $1,600. It also said that the GOP bill would grant tax reductions averaging $160,000 to households where income exceeds $1 million annually.
The Democratic bill would also boost the top tax rate paid by people who inherit estates to 55 percent, exempting the first $1 million in an estate's value. The GOP measure would maintain today's 35 percent top rate and would not tax the first $5.12 million of an estate's value.
In fresh figures released this week by Republicans, Congress' nonpartisan Joint Committee on Taxation estimated that the Democratic provision would affect 55,200 estates next year, compared with 3,600 who would face estate taxes under the GOP plan.
Democrats would impose top tax rates next year of 20 percent on dividends and capital gains, two sources of income enjoyed disproportionately by the wealthy. The GOP top rate would be 15 percent.
The GOP bill ignores some tax credits for low- and middle-income families that Democrats want to extend for college costs; for some low-income couples and large working families; and for families with children.
All were part of Obama's economic 2009 stimulus bill. Democrats say those tax breaks were meant to be permanent but Republicans say they were only a short-term response to the recession.
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Associated Press writers Jim Kuhnhenn and Andrew Taylor contributed to this report.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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