House approves tax-cut compromise bill

President Barack Obama updates the status of the tax-cut deal struck with congressional Republicans, at the White House in Washington, Monday, Dec. 13, 2010. The legislation would avert a Jan. 1 increase in income taxes for nearly all Americans, including middle and high earners. (AP Photo/J. Scott Applewhite)President Barack Obama updates the status of the tax-cut deal struck with congressional Republicans, at the White House in Washington, Monday, Dec. 13, 2010. The legislation would avert a Jan. 1 increase in income taxes for nearly all Americans, including middle and high earners. (AP Photo/J. Scott Applewhite)

Staving off the largest tax increase in history, lawmakers Friday morning passed President Obama’s tax-cut deal with Republicans through the House after fending off a last-minute effort to increase the estate tax beyond what was proposed.

The House voted 277-148 to send the plan to Mr. Obama for his signature - all-but ending one of the longest running stalemates on Capitol Hill. The result followed a long day in which Democrats struggled to overcome the anger of their most liberal members and where both parties griped about the plan’s shortcomings, including its impact on the soaring national debt.

But enough lawmakers eventually agreed that allowing tax cuts to expire was simply too risky for the economy and would possibly jeopardize the nation’s climb out of the recession.

“I will vote for this bill because I don’t want to see middle-income working people in America get a tax increase because I think that will be a depressant on an economy that needs to be lifted up,” House Majority Leader Steny H. Hoyer, Maryland Democrat, told his colleagues. “I believe that folks need certainty.”

Mr. Obama had fought hard for the package, repeatedly telling his own party to back the plan as is, despite their shared misgivings over tax breaks to wealthier Americans. He now is expected to sign the bill.

The deal would extend for an additional two years the income-tax rates under the George W. Bush-era tax cuts, extend unemployment benefits for the long-term jobless, establish an estate-tax rate of 35 percent on estates worth more than $5 million for an individual or $10 million for a couple, and give a short-term payroll-tax cut.

The Bush tax cuts are set to expire on New Year’s Day.

Mr. Obama insisted on unemployment benefits, while Republicans insisted on extending all of the income-tax cuts and establishing the new estate-tax level. Republicans said the tax increases would total $3.8 trillion over 10 years.

Congressional Democrats, who said they never signed off on the deal, have fought against it from the start, buoyed by liberal interest groups who have blasted it.

After losing an initial fight over the income-tax cuts, those Democrats instead settled on trying to undo the estate-tax part of the agreement and replace it with a 45 percent tax on estates greater than $3.5 million. That was the level for the tax in 2009.

But that estate tax proposal died just before midnight after House struck down the related amendment.

The scheduled three-hour floor debate Thursday night provided lawmakers with what was expected to be the final crack at blocking the proposal, and opponents on both sides of the aisle took full advantage of the opportunity.

Democrats warned that the rollback of the payroll tax threatened to undermine Social Security. They also said that the “giveaway to the rich” will run up the federal credit card bill and set the stage for Republicans to return with a renewed concern over the debt and a desire to pay it down by cutting the programs that benefit middle-class Americans the most.

Rep. Brad Sherman said the choice Democrats faced was a harsh one - either accept the deal or wait for next year and the deal Mr. Obama would strike with a more powerful Republican Party, newly in control of the House.

“We’re going to have to swallow hard,” said Mr. Sherman, California Democrat.

Republicans, meanwhile, balked at the “death tax,” saying it should be repealed altogether and that the tax cuts should be made permanent.

Rep. Thaddeus McCotter, Michigan Republican, said he would vote against the plan “because I oppose raising taxes, increasing deficits and debt, and worsening the entitlement crisis.”

“Despite its proponents’ best intentions, this bill will not end the suffering of unemployed and economically anxious Americans,” Mr. McCotter said. “It will prolong it.”

His comments reflected the fact that if passed, the compromise will lump an additional $858 billion onto the projected federal deficit and likely deepen the $13.879 trillion national debt - a statistic that opponents of the deal from both sides of the aisle stressed Thursday on the floor.

Rep. James P. Moran, Virginia Democrat, warned that by voting for the proposal, members of Congress would be “kicking the can down the road” to 2012, which is yet another election year. He and other Democrats said they doubt Congress and the president will have any more incentive then to let the tax cuts expire than they do now.

But other lawmakers said the prospect of allowing the tax cuts to lapse was too risky and could “crush the federal recovery.”

Rep. Paul D. Ryan, Wisconsin Republican and the incoming chairman of the House Budget Committee, said if Congress fails to act, the nation stands to lose 1.25 million jobs next year. “We’re not talking about a pro-growth economic package, but we are talking about preventing a destructive economic package from being inflicted on the American people in two weeks,” he said.

The two sides reached the deal early last week, just days after a Republican-led filibuster blocked his preferred option of letting the tax cuts expire for individuals making more than $200,000 and couples making more than $250,000.

The Senate passed the compromise plan Wednesday in a strong bipartisan show of support, 81-19, sending the measure to the House, where passage has proved to be a tougher sell.

Democrats oppose tax breaks for top income earners and called for a higher estate-tax rate in the bill. But Mr. Obama had appeared to soften the opposition of wavering Democrats with repeated pleas and a news conference where former President Bill Clinton endorsed the plan.

Though the tax-cut plan is “not perfect,” Mr. Obama said it would allow the economy to grow and create jobs in the private sector.

“We can’t let it fall victim to either delay or defeat,” he said, pushing Congress to pass the bill without any changes.

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