Tax package heads toward high stakes vote in House

By Stephen Ohlemacher

Associated Press

Published: Thursday, Dec. 16 2010 1:56 p.m. MST

President Barack Obama walks back to the White House in Washington Wednesday after a meeting on the economy at Blair House with corporate CEOs.

The Associated Press

WASHINGTON — Despite a delay, the White House pushed hard Thursday for the House to pass a tax package that would save millions of Americans thousands of dollars in higher taxes beginning Jan. 1.

Some Democratic lawmakers are seeking changes to the package that could derail the bill. Democratic leaders are staying hands-off, leaving it to President Barack Obama to persuade fellow Democrats not to put the package at risk by imposing a higher estate tax than he negotiated with Republicans.

"I think the president has been working it hard," Rep. Xavier Becerra, D-Calif., a member of the House Democratic leadership team, said Thursday.

The Senate overwhelmingly passed the package Wednesday, with broad bipartisan support. Obama is urging the House to pass it without changes, so he can sign it into law before a sweeping series of tax cuts expires at the end of December.

But first, they will hold a vote on imposing the higher estate tax, backed by rebellious Democrats who say the package is too generous to the wealthy.

House Democratic leaders originally arranged for a final vote on the measure by Thursday evening, but the timetable was in danger of slipping after a dispute arose over the terms of the debate.

"This is a vote people are making for their consciences, and for their districts," said Rep. Louise Slaughter, D-N.Y., chairwoman of the House Rules Committee.

House Democratic leaders are not twisting arms on the estate tax vote, Slaughter said. They are leaving that to the White House.

Many House Democrats, even critics of the bill, are resigned to it ultimately passing with the lower estate tax, especially after the Senate approved it, 81-19.

"It just seems like the momentum is with a bill that is unchanged," said Rep. Elijah Cummings, D-Md. Cummings said he will vote against the bill, despite a call from Obama earlier in the week.

The stakes are high. If the House passes the higher estate tax, the bill would go back to the Senate, jeopardizing the entire package and representing a public rebuke of Obama by members of his own party.

Tax cuts affecting Americans at every income level are scheduled to expire in a little more than two weeks. The package would extend them for two years.

The tax cuts, enacted under former President George W. Bush, include a more generous child tax credit, tax breaks for college students, lower taxes on capital gains and dividends and a series of business tax breaks designed to encourage investment. The package would also renew a program of jobless benefits for the long-term unemployed and enact a one-year cut in Social Security taxes.

A worker making $50,000 in wages would save $1,000 under the cut in Social Security taxes. A worker making $100,000 would save $2,000.

The bill's cost, $858 billion, would be added to the deficit.

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

At the insistence of Republicans, the plan includes an estate tax that would allow the first $10 million of a couple's estate to pass to heirs without taxation. The balance would be subject to a 35 percent tax rate.

Many House Democrats want to impose a higher estate tax, bringing back the levels in place in 2009. They persuaded House Speaker Nancy Pelosi, D-Calif., to allow a vote on the change, arguing that the higher estate tax would affect only 6,600 of the wealthiest estates, and would save $23 billion.

"It doesn't create jobs, it adds to the deficit," Rep. Chris Van Hollen, D-Md., said of the lower estate tax. "Is that the message this Congress wants to send at a time of high deficits?"

In 2009, 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.

The estate tax was allowed to expire for 2010. But under current law, it would come back in 2011 at even higher levels, with a top tax rate of 55 percent. Democrats said their plan to reinstate the 2009 tax is still more generous than current law; many Republicans said the estate tax should be done away with altogether.

"I don't like this bill, but I like even less the notion of raising taxes on average Americans," said Rep. David Dreier, R-Calif.

Rep. Mike Pence, R-Ill., said Thursday that he won't vote for the bill because it doesn't make the tax cuts permanent.

"A two-year extension of the tax code is not going to encourage the kind of investment that's going to begin to create jobs in this economy," Pence said on NBC's "Today."

Senate GOP Leader Mitch McConnell said any changes to the bill would derail the entire package, putting millions of Americans at risk of a significant tax increase next year.

"Now it's up to our colleagues in the House, and we urge Democrat leaders to resist playing political games and making partisan changes so that American taxpayers won't be hit with a huge, job-killing tax hike on Jan. 1," McConnell said.

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