House of Representatives Democrats demanding a chance to blast the tax cut deal President Barack Obama struck with Republicans delayed a vote on the massive tax measure on Thursday, but House leaders said they still expected to pass the bill.
Many Democrats derided as a giveaway to the wealthy the deal to extend across-the-board tax cuts. The $858 billion measure is seen as a likely boost to the economy, but would pile onto a federal debt that some fear is nearing dangerous levels.
Lacking the votes to pass a rule to govern floor debate, necessary before any major legislation can proceed, Democratic leaders abruptly pulled the measure, temporarily stopping debate.
Leaders will now try to come up with a new formula for meeting liberals' demands, while keeping Republicans satisfied and getting the Senate-passed legislation approved by the House.
Americans were held hostage to a ransom that the Republicans would only help these families if we gave tax cuts to the wealthiest people in this country, Representative George Miller, a Democrat, said of the deal.
Representative James McGovern, a senior member of the House Rules Committee, which is controlled by Democratic leaders and is the gatekeeper for all legislation, called the delay a little bump and indicated the bill could still pass the House later on Thursday.
If passed, the bill would add to a $13.86 trillion national debt that is now equal to more than 90 percent of the value of the U.S. economy.
The legislation represents a major victory for Republicans, who fought hard to keep taxes low on the highest incomes, and marks a move to the center by Obama after his party lost congressional elections in November.
Despite their stated concerns about the growing deficit, Obama and Republicans who helped him craft the initiative put a higher priority on extending tax cuts. Without fast action, nearly all working Americans would face higher taxes on their earnings starting on January 1.
Most of the House's 179 Republicans are expected to back the tax bill, with a core of 40-50 moderate Democrats likely joining them to propel the legislation to passage.
The legislation would extend for two years income tax cuts enacted under Republican former President George W. Bush, with Democrats softening their earlier fervent opposition to keeping the cuts for the richest Americans.
I don't like the benefits for the top two percent, but on the other hand I recognize what we got in terms of short term stimulus is huge, Democratic Representative Jane Harman said.
Many economists predict the tax package could add up to 1 percentage point to economic growth next year, due partly to a one-year cut in the payroll tax and removal of uncertainty about taxes in general.
With more money in their pockets, Obama hopes people will spend more and thus create jobs in an economy stuck with unemployment near 10 percent.
The measure would also prevent a spike in taxes on capital gains and dividends, renew long-term unemployment insurance and provide new tax relief for students, working families and businesses.
HURDLES TO PASS
After a procedural test vote on rules for debating the bill, Democrats will try to scale back an estate tax provision that has enraged liberals, who complain that it unduly eases the tax burden of the ultra-wealthy.
The estate tax amendment is expected to fail, which Democrats acknowledge should clear the way to pass the bill.
But Democrats have other gripes beyond the estate tax. Some fear a cut in the payroll tax that funds Social Security could set the stage for deep cuts in the popular retirement program after Republicans take control of the House in January.
This whole thing is a set up for Social Security, Democratic Representative Peter DeFazio said.
Obama's current position on taxes contrasts sharply with his stance earlier this year when he and his fellow Democrats fought against renewing tax reductions for the wealthiest Americans -- those with household incomes above $250,000 -- while supporting continued cuts for middle-class taxpayers.
At the time, they said that with budget deficits at record levels, the United States could not afford to give the tax breaks to the wealthiest.
But with Republicans drawing a line in the sand on the issue and scoring major victories in November 2 congressional elections -- taking control of the House and making gains in the Senate -- Obama acquiesced on tax cuts for upper-income Americans.
Democrats did win their desired extension of unemployment benefits, which were expiring for millions of people shut out of jobs in the lackluster economy.
Particularly irksome to Democrats is the provision raising the exemption threshold for the estate tax from $3.5 million in 2009 to $5 million, and cutting the estate tax rate from 45 percent to 35 percent.
(Writing by Richard Cowan; Additional reporting by Thomas Ferraro, Kim Dixon and David Morgan; Editing by Vicki Allen)