WASHINGTON—Senate Democrats hit a late snag on a last-minute agreement Friday to set federal unemployment benefits at $300 a week, down from the $400 passed by the House, as part of the $1.9 trillion coronavirus relief package.

Most Democratic senators had agreed Friday to lower the weekly federal jobless benefits but extend them through Oct. 4, instead of Aug. 29. In addition, Democrats proposed making the first $10,200 of the 2020 benefits non-taxable, the aide said.

The changes were expected to be made through an amendment from Sen. Tom Carper (D., Del.) But Sen. Joe Manchin (D., W. Va.) appeared willing to support an alternate amendment from Sen. Rob Portman (R., Ohio) that would extend the $300 weekly payments just through July 18, according to aides and lawmakers.

“I like good amendments,” Mr. Manchin said earlier Friday without specifying which amendments he was referring to.

Senate Majority Leader Chuck Schumer said the Senate would ‘finish this bill however long it takes.’

Photo: shawn thew/Shutterstock

If Mr. Manchin and all Republicans vote for Mr. Portman’s proposal, it could pass, potentially imperiling Democratic support for the bill. Mr. Portman’s proposal doesn’t include the tax relief measures. Democratic leaders held an amendment vote open for hours while they tried to resolve the issue.

“The Democrats right now are in a bit of a quandary,” said Senate Minority Whip John Thune (R., S.D.) “They’ve essentially stopped action on the floor so that they can try and persuade, I think, all their members to stay together on some of these votes,” he said.

The negotiations were likely to extend the Senate’s hourslong marathon of amendment votes on the relief package, a process that is expected to stretch into Saturday morning ahead of the bill’s final passage.

The blitz of amendments, known as a vote-a-rama, stood as the last hurdle between Democrats and Senate passage of President Biden’s relief plan. Democrats are using a special process tied to the budget to pass the package without any GOP support, with Vice President Kamala Harris casting the tiebreaking vote.

The last-minute changes to unemployment benefits capped a week of alterations made by Senate Democrats to accommodate their 50 members, who must be united in order to pass the bill.

“It defies common sense to have a cliff in the middle of August when you’ve got the Senate out of session,” said Sen. Ron Wyden (D., Ore.), chairman of the Senate Finance Committee. “I have personally felt that the benefit should be $400, it should certainly run into September, but I know some of my colleagues feel otherwise,” Mr. Wyden said.

A spokeswoman for Mr. Carper said keeping the weekly benefit at $300, where it currently is, would make it easier for states to administer.

The impact of the tax exemption would vary by person. Some with relatively low incomes overall wouldn’t get much of a benefit but a middle-income person could save more than $1,000.

Senate Democrats are advancing a $1.9 trillion Covid-19 aid package after making a series of adjustments to it. WSJ’s Gerald F. Seib explains what changes senators are making to the bill and what will likely stay the same. Photo illustration: Ang Li

It wasn’t immediately clear how the tax break would line up with the current tax filing season, given that IRS computers are programmed to see this income as taxable and some people have already filed returns with unemployment benefits as taxable income on them.

The move would reduce or eliminate surprise tax bills for people. Withholding varies across states so many people hadn’t been paying enough during the course of 2020.

“For some of us, good Zoom lighting has been our biggest pandemic problem,” said Brian Galle, a Georgetown University law professor who has been advocating for the tax change. “But millions of others are still out of work, and this ensures they won’t have to choose between paying the IRS and paying for rent or their kids’ vaccinations.”

The new agreement also extends limits on how high-income users can deduct certain business losses. Those limits, created in the 2017 tax law, were suspended by last year’s coronavirus relief law, to the frustration of progressive Democrats. They are now in effect but are scheduled to expire in 2025 like other pieces of the 2017 law. The Democratic plan would generate revenue by extending the provision through 2026.

The relief bill also provides $1,400 direct payments to many Americans, sends $350 billion to state and local governments, funds vaccine distribution, and expands the child tax credit, among other measures. The package advanced on a procedural vote Thursday with the support of all 50 members of the Democratic caucus and no Republicans.

Once it passes the Senate, the bill will return to the House, which will need to approve the altered bill again before sending it to the White House. Liberal Democrats had pushed to keep the unemployment benefits at $400 a week and weren’t expected to be pleased with the Senate’s changes. House leaders can lose no more than four House Democrats if all Republicans oppose the bill, as they did in the previous vote.

The Covid-19 Aid Plan

Senate Democrats are using a process known as reconciliation, which allows them to pass legislation tied to the budget with just a simple majority, rather than the 60 votes most bills require. But because the process allows the majority party to pass legislation on their own, Senate rules carve out a place for lawmakers in the minority to make their voice heard, by allowing them to vote on an unlimited number of amendments. In practice, lawmakers generally get tired in the early hours of the morning and agree to wrap up the amendments, before voting on final passage.

“There will be a lengthy amendment process as the rules of the Senate require,” Senate Majority Leader Chuck Schumer (D., N.Y.) said on the Senate floor Friday. “The Senate is going to take a lot of votes, but we are going to power through and finish this bill however long it takes.”

The Senate blocked an amendment from Vermont Sen. Bernie Sanders to increase the minimum wage to $15 an hour.

Photo: olivier douliery/Agence France-Presse/Getty Images

Senate Minority Leader Mitch McConnell (R., Ky.) said Democrats had assembled a wish list of liberal priorities that weren’t needed as the economy improves. But he said GOP lawmakers would try to alter the bill during the amendment votes.

“Republicans have many ideas to improve this bill,” he said on the Senate floor. “And we’re about to vote on all kinds of amendments in the hopes that some of these ideas make it into the final product.”

Many of the amendments expected on Friday and Saturday are designed to force lawmakers from the other side of the aisle to go on the record on a contentious political issue. Sen. Tom Cotton (R., Ark.), for example, said he would offer an amendment to block prisoners from receiving the direct checks.

Others give lawmakers a chance to demonstrate their support for a policy.

The Senate blocked an amendment from Senate Budget Committee Chairman Bernie Sanders (I., Vt.) to increase the minimum wage to $15 an hour. That was a plank of the bill passed by the House, but stripped out of the Senate version when the chamber’s parliamentarian ruled it didn’t comply with the rules. The amendment was opposed by all 50 Republicans and eight members of the Democratic caucus.

“If any senator believes this is the last time they will cast a vote on whether or not to give a raise to 32 million Americans, they are sorely mistaken,” Mr. Sanders said after the vote. “We’re going to keep bringing it up,” he said.

Senators including Iowa Republican Chuck Grassley arriving at the U.S. Capitol Friday.

Photo: Win McNamee/Getty Images

The amendment votes started later than otherwise planned because Sen. Ron Johnson (R., Wis.) forced the Senate’s clerks to read the entire 628-page bill, which stretched from 3:21 p.m. Thursday until 2:04 a.m. Friday. That added time to the process because it didn’t count as part of the official debate time, split between the two parties. However, party leaders later agreed to collapse the 20 hours permitted into three hours of debate.

Democrats made a series of last-minute alterations to the bill this week, largely to satisfy the demands of centrist members of their caucus.

They narrowed the group of Americans who will receive direct payments following a push from a group of centrist Democrats. Senate Democrats added a provision that would make much student-loan forgiveness free from income taxes, creating an exception from 2021 through 2025 to the normal rule that canceled debt is income. They also increased the size of healthcare subsidies for laid-off workers.

Write to Andrew Duehren at [email protected] and Richard Rubin at [email protected]

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This post first appeared on wsj.com

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