Updated at 8:16 p.m. ET
Senate Democrats are walking back some planned changes to federal unemployment benefits after objections from Sen. Joe Manchin, D-W.Va., threatened to derail President Biden's $1.9 trillion coronavirus aid package.
The new plan is to extend the current $300 weekly federal unemployment payments through Sept. 6, rather than the end of September as Senate Democrats had planned. The first $10,200 in unemployment benefits received in 2020 by households earning $150,000 or less would also be nontaxable.
Democrats thought they had unanimous agreement within the party to provide an additional month of benefits and to extend the tax-free status to all people who claimed unemployment last year. But Manchin's objections cropped up at the last minute before a planned Friday afternoon vote, forcing negotiations that dragged into the night.
"The President has made it clear we will have enough vaccines for every American by the end of May and I am confident the economic recovery will follow," Manchin said in a statement. "We have reached a compromise that enables the economy to rebound quickly while also protecting those receiving unemployment benefits from being hit with unexpected tax bill next year."
The agreement would also allow businesses access to more generous tax write-offs for losses through 2026.
The version of the legislation that passed the House would have increased the payments to $400 per week through the end of August. The change is a compromise between progressive members who wanted enhanced benefits for several more months and moderate Democrats who wanted to curb the weekly payments. The updated version of the bill would make the first $10,200 of unemployment benefits received in 2020 nontaxable.
Democrats say the goal was to avoid a payment cliff in August in which millions of people would suddenly lose unemployment coverage. Senate Finance Committee Chairman Ron Wyden, D-Ore., said he is continuing to work with Budget Committee Chairman Bernie Sanders, I-Vt., on further tax forgiveness.
"What we're looking at is making sure that we can get a benefit so that people can make rent and pay groceries," Wyden said on the Senate floor. "And by God, we sure as hell shouldn't let folks who are unemployed pay taxes on those unemployment benefits they secured in 2020."
Extending federal unemployment benefits through September means the program expiration would line up with the end of the fiscal year. Democrats hope to pass full appropriations bills and issues like federal unemployment funding could be addressed through that process.
The Senate is expected to vote on the full COVID-19 relief package in the coming days. Senate Democratic leaders say they are confident their party will vote unanimously to pass the legislation. The House must then revote on the final version of the bill with a goal of having it signed into law before the end of next week.