Senate approves tax cut deal; House Dems weigh amending estate tax
By Lori Montgomery and Shailagh Murray
Washington Post Staff
Writers
Wednesday, December 15, 2010; 2:46 PM
A sweeping tax package negotiated by the White House and Republican leaders
sailed through the Senate on a 81-19 vote and now awaits action by the House as
early as Thursday.
The Senate vote represented a rare moment of bipartisanship and underscored
the depth of concern among lawmakers in both parties about the pace of the
economic recovery. The legislation would extend for two years the income-tax
cuts enacted 10 years ago under President George W. Bush. The cuts are set to
expire on New Year's Eve. But the package also includes a variety of measures
aimed at spurring new hiring and consumer spending.
The stimulus-related provisions include a one-year reduction in the payroll
tax rate for individuals, to 4.2 percent from 6.2 percent; an expensing break
that would allow businesses to write off new equipment purchases in the 2011 tax
year; and continued funding for an emergency program that provides up to 99
weeks of benefits for jobless workers. Additional tax provisions would target
businesses and individuals in narrower groups.
Prospects for House passage appeared to be brightening Wednesday after an
initially poor reception, but House Democratic leaders said that liberals
continue to insist on changes to the estate-tax provision in the bill.
"Middle class families need a boost in this economy, and that is exactly what
this plan gives them," Senate Majority Leader Harry M. Reid (D-Nev.) said in a
statement. "It is not perfect, but it will create 2 million jobs, cut taxes for
middle class families and small businesses, and ensure that Americans who are
still looking for work will continue to have the safety net they rely on to make
ends meet."
Before senators began debating the $858 billion package in late morning,
President Obama urged lawmakers in both houses to pass the tax package "as
swiftly as possible." He called the plan "an essential ingredient in spurring
economic growth over the short run."
Speaking before a meeting with business leaders, Obama said: "I am absolutely
convinced that this tax cut plan, while not perfect, will help grow our economy
and create jobs in the private sector." He acknowledged that lawmakers of both
parties object to different aspects of the plan but said, "That's the nature of
compromise." He added that "we can't afford to let it fall victim to either
delay or defeat."
The Senate considered and rejected three amendments before approving the
legislation. A proposal by Sen. Tom Coburn (R-Okla.) would have paid for the
extension of jobless benefits and refundable tax credits included in the measure
by cutting $156 billion in federal spending, as well as barring unemployment
payments to millionaires.
Sen. Jim DeMint (R-S.C.) proposed a permanent extension of the Bush-era tax
cuts, permanent repeal of the estate tax and a permanent fix for the expanding
alternative minimum tax. And Sen. Bernard Sanders (I-Vt.) proposed to eliminate
the Bush-era tax cuts for the wealthiest 2 percent of taxpayers, dedicating half
the savings to deficit reduction and the other half to fresh infrastructure
spending.
Despite the lopsided tally, many lawmakers were lukewarm about portions of
the package. For Democrats, extending all the Bush tax breaks - if only
temporarily - was a bitter concession, after many in the party, including Obama,
had campaigned on a pledge to allow rate cuts for the wealthiest households to
expire.
"This wasn't the bill I would have wanted," Sen. Al Franken (D-Minn.) said in
a Senate floor speech. "If there were a better way, I would do that in a
heartbeat. But today we are forced to decide between taking a stand against
irresponsible tax cuts for millionaires versus helping struggling families. And
given that choice, I simply can't turn my back on all the Minnesotans that
desperately need the help this bill will provide."
Sen. Sherrod Brown (D-Ohio) voted against the advancing the package on Monday
"to send a message to the House that there are allies here," but he supported it
on final passage. Brown, one of the Senate's most liberal members who is up for
reelection in 2012, said he changed his mind after speaking with his minister
and reading letters from constituents who are struggling to find jobs in his
hard-hit home state.
Fourteen Democrats voted against the bill: Sens. Jeff Bingaman (N.M.), Byron
Dorgan (N.D.), Russell Feingold (Wis.), Kirstin Gillibrand (N.Y.), Kay Hagan
(N.C.), Tom Harkin (Iowa), Frank Lautenberg (N.J.), Patrick J. Leahy (Vt.), Carl
M. Levin (Mich.), Jeff Merkley (Ore.), Mark Udall (Colo.), Tom Udall (N.M.), Ron
Wyden (Ore.) and Sanders. And five GOP senators were opposed: Sens. John Ensign
(Nev.), Jeff Sessions (Ala.) and George V. Voinovich (Ohio), as well as Coburn
and DeMint.
Stiffer estate provision
The strong 83-15 Senate vote Monday to begin debate on the package also
appeared to have weakened resolve among House Democrats to block the measure
when it comes to the floor this week. After meeting for two hours with
rank-and-file lawmakers late Tuesday, senior Democrats said the House is likely
to stage votes to change the terms of a revived estate tax that many
Democrats view as overly generous to the wealthy.
Outraged by the agreement to exempt individual estates worth as
much as $5 million from taxation, senior Democrats said they would press to
lower the threshold to $3.5 million. They also want to impose a stiffer tax on
larger estates, by setting the rate at 45 percent rather than the 35 percent
demanded by Republicans and agreed to by Obama.
Those are the same terms that were in effect in 2009. The estate tax expired
for the 2010 tax year but is set to spring back to life next month with much
tougher provisions. House Democrats said their alternative would hit only about
6,600 of the nation's wealthiest households while raising an additional $26
billion over the next two years compared with the Obama-GOP compromise - money
that could be used to reduce the soaring national debt.
"There's a real debate here between Republican proponents of tax cuts for the
very richest Americans and our argument that that's fiscally irresponsible and
unfair to future generations," said Rep. Peter Welch (D-Vt.), who was leading an
effort to strip the tax package of what he called "indiscriminate giveaways" for
the wealthy.
Refund-check proposal
House leaders were also considering a proposal by Rep. Brad Sherman
(D-Calif.) to convert the payroll tax holiday into a one-time refund check that
would be issued to every American worker early next year. Sherman said the
alternative was designed not only to get cash more quickly into the hands of
consumers, but also to protect Social Security. Some Democrats fear that
Republicans would try to extend the one-year payroll tax holiday, permanently
reducing the flow of funds to Social Security at a time when the GOP and deficit
hawks in both parties are urging lawmakers to cut benefits for future retirees.
If any amendments were adopted in the House, the tax package would have to go
back to the Senate for further action. But Sherman said House leaders made clear
that they are "looking for changes that cause the bill not be dead on arrival in
the Senate" - an outcome that would cause tax rates to rise next month for
virtually every American worker.
"I'm confident that middle-class tax cuts will not expire and that we will go
forward" with a vote on the tax package this week, Rep. Rob Andrews (D-N.J.),
who often speaks for House leadership, said after the meeting.
House Majority Leader Steny H. Hoyer (D-Md.) told reporters earlier in the
day that although "significant concerns" remain about the deal, the
"overwhelming majority" of lawmakers in both parties think it's "absolutely
essential" to approve a measure to prevent tax rates from rising across the
board next year.
"The vote in the Senate indicates the urgency that is felt by a broad
spectrum that the middle-income taxes not be increased come January 1. In order
to effect that, you've got to pass a bill," Hoyer said, adding that there's
"strong support for moving ahead."
The White House also expressed optimism, as Obama worked the phones to build
support among House lawmakers.
"The president has had some good conversations. And I think we are on a path
toward getting this agreement through the House and ultimately to the
president's desk," said White House press secretary Robert Gibbs, adding that
polls show the package has "broad bipartisan support . . . not just in the
Senate, but with the American people."
A key GOP endorsement
As liberals complained, a growing chorus of conservatives also criticized the
tax package, particularly its failure to permanently extend the Bush-era cuts.
However, Americans for Tax Reform, an influential anti-tax group led by GOP
activist Grover Norquist, endorsed the deal Tuesday, and House Republican aides
said they expected no more than 20 GOP lawmakers to vote against it if it
remained in its current form.
Democrats were also giving the package a second look, Hoyer said, noting that
"there are some very good things in it from the perspective of growing the
economy, reaching out to people who are unemployed and giving them some
additional help. . . . There are a lot of things in there that are going to help
middle-income families in a tough economy. So people have to weigh that."
Senate leaders also said Tuesday that as soon as the Senate finishes the tax
bill, they would take up a new U.S.-Russian nuclear arms treaty that is one of
Obama's top priorities. "The time has come that we have to start voting," said
Majority Leader Harry M. Reid (D-Nev).
Administration officials said they had secured the 67 votes needed for Senate
ratification. But Sen. Jon Kyl (Ariz.), the second-ranking Republican,
disagreed, saying that he "would discourage them" from trying to ratify the
treaty before the Christmas break.
At least nine Republican votes would be needed to pass the New START
agreement.
Staff writers William Branigin, Felicia Sonmez and Mary Beth Sheridan
contributed to this report.
© 2010 The
Washington Post Company