Liberal concerns delay House vote on tax-cut deal

By Lori Montgomery and Shailagh Murray
Washington Post Staff Writers
Thursday, December 16, 2010; 5:19 PM

A liberal uprising over House procedures on Thursday was delaying a final vote on a far-reaching tax compromise brokered by the White House and Republican leaders.

Dozens of Democrats were demanding an opportunity to cast a vote to change an estate tax provision they view as too generous for the wealthy without also approving the rest of the package as passed by the Senate. That package contains a two-year extension of George W. Bush administration tax policies that benefit families at all income levels, including the very wealthiest Americans. Democrats have complained for years about those provisions and want an opportunity to vote against them.

Senior Democrats said the delay was unlikely to derail the package, which is intended to prevent tax rates from rising in January for virtually every household. "I expect we will pass this agreement that the Senate passed 81 to 19," said Rep. Robert E. Andrews (D-N.J.), who often speaks for House leadership.

But the revolt appeared likely to postpone a final vote on the $858 billion measure until late in the evening.

Rep. Raul M. Grijalva (D-Ariz.) explained the reservations that some liberals had to the process originally devised by House leaders. That process would have brought two versions of the Senate-passed package to the House floor. The first version would have contained everything in the Senate bill, including the upper-income cuts, but would have amended the estate tax provisions to hit more estates with a higher tax. The second version contained the Senate bill as passed.

Grijalva said liberals wanted to vote for the estate tax amendments but worried that if the first version passed, they would also have been put in the awkward position of having endorsed tax policies they fiercely oppose.

"Let's say you vote for the amendment and you concur with that exception, you're swallowing everything else," Grijalva said. "You're kind of in a trap. You have to vote 'no' on it, and then so you can preserve your ability to vote 'no' on the final passage. So that's where the dilemma has been.... It's a very stressful vote for everybody in the caucus, and this just added a little additional drama because we felt that we were getting set up. Regardless of how we win, we're still going to lose. So if we're going to lose, let's lose with a strong message."

House leaders initially proposed adding a third vote that would have permitted liberals to vote for the amended version but then vote against sending it back to the Senate for further action. But after huddling with Democratic leaders on the House floor, Rep. Peter A. DeFazio (D-Ore.) said liberals were pushing for a new and broader amendment that would include changes to the estate tax, substitute the president's signature Making Work Pay tax credit for a two-percentage point reduction in the Social Security payroll tax and add a $250 bonus payment for Social Security recipients who are being denied a cost of living increase for the second year in a row.

"We are looking for a broader alternative than just the vote on the estate tax," DeFazio said. "This is the last opportunity we have.... People are paying attention now, and we think we need to make a strong statement."

The tumult in the House comes one day after the tax package sailed through the Senate, 81 to 19, as a majority of senators in both parties voted to keep the Bush administration tax cuts in place for families at all income levels for another two years.

The package would add even more to the rising national debt over the next decade than the $814 billion stimulus President Obama pushed through Congress soon after taking office. But the strong Senate vote underscored the concern among lawmakers in both parties about the sluggish pace of recovery and an unemployment rate stuck near 10 percent.

In a statement celebrating the Senate vote - his first big bipartisan victory since Republicans strengthened their hand in Congress in the November midterm elections - Obama exhorted House members to set aside their concerns and support a package he described as "a win for American families, American businesses and our economic recovery."

"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. "As this bill moves to the House of Representatives, I hope that members from both parties can come together in a spirit of common purpose to protect American families and our economy as a whole by passing this essential economic package."

The White House has not produced an economic analysis of the tax package, having been stung by its overly optimistic forecast that the 2009 stimulus would prevent the jobless rate from rising above 8 percent. Unemployment stood at 9.8 percent in November.

But in recent days, the White House has bombarded reporters with a host of forecasts from such independent sources as Bank of America, Deutsche Bank and Goldman Sachs predicting that the package would boost economic growth next year by at least half a percentage point of gross domestic product. Mark Zandi, chief economist at Moody's Analytics, is among the most optimistic forecasters, predicting that the package would produce 1.6 million jobs next year and lower the unemployment rate to 8.5 percent by next Christmas.

Although most forecasters had assumed that Congress would extend tax cuts for the middle class, they had not expected Obama to win another year of jobless benefits or major new temporary tax incentives such as the payroll tax holiday - measures economists view as powerful options for bolstering the recovery.

Economists consider tax cuts for the wealthy to be less effective as stimulus because much of the money is likely to be saved rather than flow directly into the economy. Liberal Democrats cited that concern as they complained about Obama breaking his campaign pledge to end the Bush tax cuts for the wealthy and bowing to GOP demands for a less-stringent estate tax.

The compromise package would exempt estates worth as much as $5 million and impose a 35 percent rate on larger inheritances. With an exemption that large, the new tax would affect the smallest number of estates in any year since 1934, according to the nonpartisan Tax Policy Center - except for this year, when the tax lapsed altogether.

Late Wednesday, House leaders decided to bring to the floor two versions of the Senate bill. One would lower the estate tax exemption to $3.5 million and raise the tax rate on larger estates to 45 percent. If that version passed, it would immediately be sent back to the Senate for further action. But if that version fails, as expected, the House would vote on the package as passed by the Senate and send it on to the president.

House Speaker Nancy Pelosi (D-Calif.) told reporters that she "would love to see" the House change the estate tax provisions. But an aggressive White House lobbying campaign and the lopsided Senate vote appeared to be tamping down opposition. Late Wednesday, Rep. Daniel Lipinski (D-Ill.), a rank-and-file Democrat expressing the views of many of his colleagues, issued a statement saying he would support the Obama-GOP deal.

"The nature of compromise is that no one gets everything they want," Lipinski said. After days of debate over whether to change the bill, "I concluded that it is probably not possible to make any substantive changes without threatening the agreement. That is a chance I do not want to take."

After the midday vote, leaders of both parties in the Senate praised the measure.

"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."

Senate Minority Leader Mitch McConnell (R-Ky.) added that the vote "represents a clear shift in the debate over America's path to economic recovery," as "Democrats joined our effort to ensure taxes aren't going up on anyone and that Americans are keeping their money so they, not the government are more equipped to help bring our economy back."

McConnell also warned House leaders "to resist playing political games and making partisan changes" to the measure that would imperil its passage.

Still, many lawmakers were lukewarm about parts of the package. For Democrats, extending all the Bush tax breaks, if only temporarily, was a bitter concession.

"This wasn't the bill I would have wanted," Sen. Al Franken (D-Minn.) said in a 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."

Thirteen Senate Democrats voted against the bill: Jeff Bingaman (N.M.), Byron L. Dorgan (N.D.), Russell Feingold (Wis.), Kirsten 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.) and Ron Wyden (Ore.). Vermont independent Bernard Sanders, who caucuses with the Democrats, also voted no.

Five GOP senators were opposed: Tom Coburn (Okla.), Jim DeMint (S.C.), John Ensign (Nev.), Jeff Sessions (Ala.) and George V. Voinovich (Ohio).

montgomeryl@washpost.com murrays@washpost.com

View all comments that have been posted about this article.

© 2010 The Washington Post Company