Obama tax deal passed by US House

  • Business
  • Friday, 17 Dec 2010

WASHINGTON: President Barack Obama's sweeping tax cut compromise with opposition Republicans cleared a final hurdle in the House of Representatives - an uncommon show of bipartisanship after years of political warfare.

Angered by what they saw as overgenerous breaks for the wealthy, liberal House Democrats had threatened to unravel Obama's deal, announced just 10 days earlier, to avert scheduled Jan. 1 tax increases and renew jobless benefits for victims of the worst recession in 80 years.

After Democratic critics forced a delay early in the day, the House battled over the measure late into the night before passing the bill 277-148 at about midnight EST Friday (0500 GMT). The Senate on Wednesday passed it by an overwhelming 83-15 margin.

The measure also will cut federal Social Security pension taxes for nearly every wage-earner and pump billions of dollars into the still-sluggish economy.

The Republican leadership in the Senate had warned that any change to the measure in the House, which would require a new vote in the Senate, would kill the compromise that Obama hammered out with the opposition.

Obama was testing his ability to govern in a far more bipartisan fashion, a new strategy forced upon him by the Republican landslide in November's congressional elections. The opposition party gained a majority in the House and significantly diminished the Democratic majority in the Senate.

In most important legislative votes in the first two years of Obama's term, Republicans had unanimously tried to block the president's legislative agenda.

Many of those who supported a continuation of the tax cuts argued that the package as a whole amounted to a second stimulus. Opponents, however, saw it as an $858 billion addition to the spiraling U.S. debt. None of the provisions in the bill are paid for by savings in other government spending.

After the Senate vote Wednesday, Obama declared himself still opposed to portions of the legislation because it keeps in place big tax benefits for the wealthy. Nevertheless, he said, compromise was necessary.

"I know that not every member of Congress likes every piece of this bill, and it includes some provisions that I oppose. But as a whole, this package will grow our economy, create jobs, and help middle class families across the country," Obama said in a statement.

Largely marginalized in the negotiations leading to the bill, House Democrats emphasized their unhappiness with Obama.

Rep. Rob Andrews said he was supporting "an imperfect bill" in hopes of stimulating job creation.

Republican Rep. Eric Cantor, in line to become majority leader, said the measure, while not perfect, marked a "first step" toward economic recovery.

In return for keeping in place income tax cuts for all income levels, Obama had won a Republican pledge to vote for a 13-month extension of jobless benefits for the long-term unemployed. The deal also includes a 2 percent reduction in payroll taxes that finance Social Security, the federal pension system for the retired and disabled.

Most Democrats, along with Obama, opposed keeping tax cuts in place for households earning more than $250,000 a year. But Republicans threatened to scuttle a continuation of tax breaks for those who earn less than that amount without continued breaks for the wealthy.

Democrats made plain their unhappiness with Obama as the measure moved toward a final vote. Rep. Brad Sherman said the president had agreed to pay a ransom to get legislation that Republicans would support, and Rep. Elijah Cummings said the White House "could have gotten a better deal" in secretive talks.

Obama and supporters of the Senate-passed bill had gambled correctly that House Democrats would capitulate in the end, reasoning that no member of Congress wants to be linked with a vote that causes Americans' income taxes to rise on Jan. 1. That would have happen without a new tax law to replace the Bush-era tax cuts that expire at the end of the year.

With the economy performing poorly and a year-end tax increase looming, the bill progressed quickly - there were none of the customary congressional hearings that normally precede debate on major legislation, and few if any complaints that lawmakers had not had enough time to review the legislation.

The part of the Senate-passed legislation that liberal House Democrats find most upsetting involves inheritance taxes. At the insistence of Republicans, the first $10 million of a couple's estate could pass to heirs without taxation. The balance would be subject to a 35 percent tax rate.

The estate tax was repealed for 2010. Under current law, it is scheduled to return next year with a top rate of 55 percent on the portion of estates above $1 million, or $2 million for couples.

House Democratic leaders want to bring back the 2009 estate tax levels. That year, individuals could pass $3.5 million to their heirs, tax-free. Couples could pass $7 million, with a little tax planning, and the balance was taxed at a top rate of 45 percent.

Numerous business tax breaks that are due to expire would also be extended, as would a series of provisions relating to energy taxes, including the federal subsidy for ethanol. - AP

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