Obama's Earmarked Tax Cut Deal Expected To Pass; 1st Senate Vote Today

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U.S. Senate Nears Vote On Obama's Tax Package


The Democratic-led Congress moved on Monday toward grudging approval of President Barack Obama's deal with Republicans to extend expiring tax cuts, even for the wealthiest Americans.

A Senate vote is set for Monday on legislation that would avert a Jan. 1 increase in income taxes for nearly all Americans. The package faces a tougher sell in the House of Representatives, where Democrats have voted not to allow it to reach the floor without changes to scale back tax relief for the rich.

Backers were expected to muster on Monday the needed 60 votes in the 100-member Senate to clear a procedural hurdle, before passage on Tuesday or Wednesday.

The bill would then go to the House of Representatives for likely passage — despite the complaints from many Democrats that Obama conceded too much to Republicans.

At issue is the extension of tax breaks for Americans at all income levels. Those lower rates, that were put in place during the administration of former President George W. Bush, expire at the end of the year. Obama campaigned for the presidency and had routinely vowed during his first two years in office to keep the tax breaks in place for American households earning less than $250,000 a year.

The Republicans have been fighting that, insisting that the cuts remain in place for all income levels. The opposition party vowed to block any extension if the wealthy did not benefit as well.

Obama, realizing the Republicans had the votes to make good on their threat, crafted a compromise a week ago to go along with a renewal of cuts for all income levels for a two-year period. In return Republicans promised to drop their opposition to a separate measure: an extension of unemployment benefits for the long-term unemployed. They said they would agree to a 13-month extension of those payments.

Also included in the deal is a 2 percent reduction in payroll taxes that Americans pay into the Social Security federal pension fund for retired people.


'A bridge too far'

The most explosive part of the deal, the one that House Speaker Nancy Pelosi at one point called "a bridge too far," was a major concession to Republicans on the amount of taxes heirs pay on inheritance. The package Obama negotiated would set the top rate at 35 percent and exempt the first $5 million of an individual's estate. Couples could exempt $10 million.

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But Representative Chris Van Hollen, a member of the House Democratic leadership, said, "We're not going to hold this thing up at the end of the day."

Van Hollen, appearing on "Fox News Sunday," indicated that Democrats would like to get a separate vote on the inheritance tax, a provision that he said would cost $25 billion for just 6,600 people.

"That doesn't help the economy," Van Hollen said. "It hurts the deficit."

Without the deal, the estate tax was scheduled to return next year to a top rate of 55 percent for estates larger than $1 million for individuals and $2 million for married couples.

The No. 2 Democrat in the Senate, Dick Durbin, said Democrats should "eat their spinach" and accept a deal because their influence will plummet when the new Congress convenes next month.

Republicans won control of the House and made gains in the Senate in November 2 congressional elections.

"It is the only stimulus we can bring to this economy," Durbin said on CNN's "State of the Union" program on Sunday.


'No one wants to see taxes go up'

Proponents note that the $856 billion package also extends jobless benefits and provides other tax breaks aimed at lower-income families, and would renew a wide array of subsidies and breaks for businesses and renewable energy.

White House adviser David Axelrod said he believed the House would approve the package without significant changes.

"We believe that when it comes back to the House, that we will get a vote, and that we'll prevail there, because at the end of the day, no one wants to see taxes go up on 150 million Americans" on New Year's Day, Axelrod said. "No one wants to see 2 million people lose their unemployment insurance, and everybody understands what it would mean for the economy if we don't get this done."

Axelrod said he does not foresee "major changes" in the House to the compromise and that Pelosi "understands the consequences of inaction" and "urgency in passing it."

The Senate began debate on Thursday on a slightly reworked version of the president's plan, adding, for example, incentives for renewable energy.

Democratic Representative Jerrold Nadler, appearing on CBS's "Face the Nation," likened Republicans to political thugs in blocking an extension of tax cuts for the middle income unless they are also renewed for the rich.

"I think the alternative is to say we're not going to submit to that blackmail and let the president and the Democrats go to the people, who the polls show want the upper-end tax cuts not to continue but want the middle-class tax cuts, and say, don't submit to the blackmail," Nadler said.

While Obama and his supporters have cast the issue as make it or break it by year's end, the reality of the matter is that Republicans likely would get their way on tax breaks for all income brackets when they take control of the House next year. They become the majority in the lower house and significantly diminished their minority status in the Senate in a landslide election victory last month.

If the tax cut extension has to be passed by the next Congress, the legislation would almost certainly be made retroactive to the first of the year, making the year-end deadline somewhat of a false issue.

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Earmarks Used To Lure Support For Tax-Cut Bill


In the spirit of the holiday season, President Barack Obama's tax-cut deal with Republicans is becoming a Christmas tree tinseled with gifts for lobbyists and lawmakers.

There are ethanol subsidies for rural folks, commuter tax breaks for their cousins in the cities and suburbs, wind and solar grants for the environmentalists - all aimed at winning votes, particularly from reluctant Democrats.

The holiday additions are being hung on the big bill that was Congress' main reason for spending December in Washington, long after the elections that will give Republicans new power in January. The measure will extend Bush-era tax cuts, averting big tax increases for nearly all Americans, and keep jobless benefits flowing.

Republicans generally liked that agreement, worked out by Obama and GOP leaders. Democrats generally didn't, hence the add-ons.

It's expected to come to a decisive vote next week, at a total cost by the latest congressional estimate of $857.8 billion.

Almost $5 billion in subsidies for corn-based ethanol and a continuing tariff to protect against ethanol imports were wrapped up and placed on the tree Thursday night for farm-state lawmakers and agribusiness lobbyists. Environmentalists won more grants for developers of renewable energy, like wind and solar.

For urban lawmakers, there's a continuation of about-to-expire tax breaks that could save commuters who use mass transit about $1,000 a year.

Other popular tax provisions aimed at increasing production of hybrid automobiles, biodiesel fuel, coal and energy-efficient household appliances would be extended through the end of 2011 under the new add-ons.

The package also includes an extension of two Gulf Coast tax-incentive programs enacted after Hurricane Katrina to spur economic development in Mississippi, Louisiana and Alabama.

While the add-ons may have won more votes for the Obama-GOP deal in the Senate, their potential impact is less clear in the House, where Democrats have criticized the package as a tax giveaway to the rich.

There's the possibility the added goodies will have opposite the intended effect for some lawmakers. Rep. Jeff Flake, R-Ariz., said the add-ons could turn his fiscally conservative colleagues against the bill.

"You don't want to be accused out there of supporting stimulus three," he said. "It will knock some votes off in the House, but more than anything, it will show the voters out there that things haven't changed with Republicans."


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