"Unfortunately, it appears the that the Republicans' blind adherence to Tea Party extremism is making it impossible to reach this sort of balanced agreement before the election," Reid wrote.
Reid has little choice but to shelve tax-break legislation before the election. There are 23 Democratic seats up for grabs
in the fall, several of them in swing states that would not look favorably on senators who voted to raise taxes. Democrats now hold only a four-seat majority in the Senate.
Republicans, meanwhile, refuse to back any plan that increases taxes and are pressuring Reid to preserve the existing tax breaks.
The Republican lawmakers, including Minority Leader Mitch McConnell, R-Ky., wrote to Reid, demanding that he quickly take up legislation to extend all current tax cuts, warning that if they don't act before the cuts expire at year's end, the nation would be hit with a $310 billion tax increase next year.
"This would be, without exaggeration, the largest tax increase in American history
," Republicans told Reid. "The failure to extend the expiring tax relief would hit all taxpayers, undermine small businesses and be a dangerous drag on the economy."
Senate Republicans demanded a speedy vote on the tax breaks immediately after House Speaker John Boehner, R-Ohio, announced that the he would call a House vote on tax cut extensions before the election.
"Any sudden tax hike would hurt our economy," Boehner said last week in announcing the push for a tax-cut vote. "This will give Congress time to work on broad-based tax reform that lowers rates for individuals and businesses while closing deductions, credits and special carve-outs."
The House, with a big Republican majority, will easily pass the tax cuts, allowing Republicans to accuse Senate Democrats of blocking the bill from becoming law and causing further economic instability.
Dozens of tax cuts are set to expire by the end of the year, including the Bush-era tax breaks for all taxpayers. Lawmakers extended those cuts for a year in a compromise deal struck in 2011.
Democrats want to extend the tax breaks only for lower income taxpayers while allowing taxes to rise on those who earn more than $200,000 a year. Democrats are also eager to repeal tax breaks for the nation's five largest oil companies, who enjoyed record profits while gas prices rose to historic highs.
Republicans say raising taxes on higher income earners would be a blow for small-business owners, who create most new jobs.
Reid's decision means that a Senate vote on extending the tax cuts would have to wait for the "lame duck" session that follows the election and typically concludes by Christmas eve, leaving lawmakers little time to negotiate.