Congress votes to extend Bush-era tax cuts until '12

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By Lori Montgomery and Shailagh Murray
Washington Post Staff Writer
Friday, December 17, 2010

Congress approved the most significant tax bill in nearly a decade late Thursday, overcoming liberal resistance to continue for two more years tax breaks enacted under president George W. Bush and to provide a fresh boost of federal support to the tepid economic recovery.

The package, brokered by President Obama and Republican leaders in the wake of the November elections, angered many Democrats, who have long argued that the Bush tax cuts were skewed to benefit the wealthy. But their last-minute campaign to scale back the bill's benefits for taxpayers at the highest income levels failed, and the House passed the measure 277 to 148, with 112 Democrats and 36 Republicans voting "no."

"This bill, the president of the United States believes and I believe, will have a positive effect on the economy," said House Majority Leader Steny H. Hoyer (D-Md.). "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."

The $858 billion package now goes to the White House. With his signature, expected as soon as Friday, Obama will prevent taxes from rising on New Year's Day for virtually every American household. The measure also will guarantee unemployed workers in hard-hit states up to 99 weeks of jobless benefits through the end of next year. And it will create major new incentives for business and consumer spending in 2011, including a two-percentage-point reduction in the Social Security payroll tax that would let workers keep as much as $2,136.

The package breezed through the Senate earlier this week on a vote of 81 to 19, giving Obama his strongest bipartisan victory on a major initiative since he took office. Opposition in the House crumpled in the face of that overwhelming showing, though House liberals insisted on offering an alternative that would levy a higher tax on estates than the Obama-GOP compromise will impose. That effort failed shortly before midnight, 194 to 233.

Obama administration officials Thursday night hailed the bill's passage. "We had a responsibility to protect middle class families from a tax increase that would have hit their paychecks and harmed the recovery," Treasury Secretary Timothy F. Geithner said in a statement. "And while we do not agree on everything in this legislation . . . this legislation is good for growth, good for jobs, good for working and middle class families, and good for businesses looking to invest and expand their workforce."

Liberals opposed the deal in part because they believe the temporary extension of the Bush breaks would eventually become permanent, setting lower tax rates far into the future. That would increase pressure on lawmakers to cut spending as a way of reducing record federal budget deficits, placing a host of cherished social programs in jeopardy.

But for Obama, the two-year window represents an opportunity to tackle the ambitious task of overhauling the federal tax code. By sunsetting current policies immediately after the 2012 presidential election, lawmakers in both parties said the measure sets a natural timetable for developing a tax-reform plan - an essential step toward reining in the rising national debt.

Obama placed numerous calls to House Democrats this week to urge their support for the deal, and got an earful in return. Rep. Elijah Cummings (D-Md.) said he told the president that one of his concerns was that "these tax cuts would not end in 2012, because in an election year, I think it's very, very difficult" to raise taxes.

Obama replied that the fate of the Bush tax cuts "would be part of his platform when he ran," Cummings said. "So it should be very interesting."

Republicans, too, have been pressing for a temporary extension of the Bush tax cuts as a bridge to tax reform. Like the last major tax overhaul in 1986, a new rewrite is likely to take years to draft and push through Congress. But White House officials have been encouraged by the level of engagement from Republicans, who will hold 47 seats in the Senate and take control of the House in January.

Key lawmakers in both parties have embraced a deficit-reduction plan produced by Obama's fiscal commission, which includes a tax overhaul that would lower rates across the board but raise additional revenue by closing dozens of long-standing loopholes, such as the mortgage-interest deduction claimed by many homeowners. Meanwhile, the relative ease with which Obama and the GOP were able to strike a deal over the Bush cuts has raised hopes on both sides for productive talks in the future.


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