House Republicans Drop Bid to Add Spending Cuts to Budget

The U.S. Capitol stands in Washington, D.C., U.S., on Monday, Dec. 31, 2012.

The House is poised to vote tonight on a bill to avert tax increases for most U.S. workers after Republicans abandoned their effort to attach spending cuts that would have been rejected by the Senate.

Oklahoma Representative Tom Cole said he expects the House to pass the Senate’s plan unchanged with a “substantial” bipartisan vote. The House Rules Committee set parameters for votes beginning in the 9 p.m. hour Washington time.

House passage of the Senate bill would cancel $600 billion in automatic tax increases and spending cuts, the so-called fiscal cliff, that were to take effect starting today. The Senate passed its plan on an 89-8 vote early this morning.

“Let’s accept the wins that we have and live to fight another day,” Cole said in an interview on Bloomberg Television.

The Senate deal was worked out by Vice President Joe Biden and Senate Minority Leader Mitch McConnell, a Kentucky Republican.

The Senate bill would make permanent the income tax cuts for most workers that ended at midnight, continue expanded unemployment benefits, and delay automatic spending cuts for two months. It would let a 2 percent payroll tax cut expire.

The measure isn’t the grand bargain on deficit reduction lawmakers wanted when they created the tax-and-spending deadlines over the past three years. Instead, it would avert most of the immediate pain and postpone Congress’ fiscal feud for two months -- until a February fight over raising the $16.4 trillion debt limit.

Photographer: Andrew Harrer/Bloomberg

The U.S. Capitol stands in Washington, D.C., U.S., on Monday, Dec. 31, 2012. Close

The U.S. Capitol stands in Washington, D.C., U.S., on Monday, Dec. 31, 2012.

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Photographer: Andrew Harrer/Bloomberg

The U.S. Capitol stands in Washington, D.C., U.S., on Monday, Dec. 31, 2012.

Republican Opposition

House Republicans have opposed higher tax rates for any income level, and a number of them objected today that the Senate bill didn’t cut spending enough.

Earlier today, House Speaker John Boehner offered fellow Republicans two options. He told members they could either amend the Senate bill if there were enough members to pass it, or vote on the unchanged Senate measure, said Republican Steven LaTourette of Ohio. Leaders later scheduled the vote on the unamended Senate bill.

“I heard the speaker say he’s going to vote” for the Senate-passed bill even without amendments, John Fleming, a Louisiana Republican, said after a party caucus meeting. Fleming said he didn’t believe a spending-cut amendment had enough Republican votes to pass.

A Democratic leadership aide said on condition of anonymity that the Democratic-controlled Senate wouldn’t take up an amended bill.

‘Gone Home’

“My senators have gone home,” said Senate Majority Leader Harry Reid when asked earlier today whether the Senate would consider any changes made by Republicans.

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House Speaker John Boehner, a Republican from Ohio, speaks during a news conference in Washington, D.C., U.S.. Close

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House Speaker John Boehner, a Republican from Ohio, speaks during a news conference in Washington, D.C., U.S..

The Senate vote had shifted the pressure to Boehner of Ohio. In his two years as speaker, Boehner has had to quell rebellions among fellow Republicans backed by the anti-tax Tea Party.

The second-ranking House Republican, Majority Leader Eric Cantor of Virginia, declared, “I do not support” the Senate bill after the first of two private meetings of House Republicans today.

The Senate bill marked a rare bipartisan agreement for lawmakers who have been trying for more than two years to reach an accord on taxes and spending, hurtling from deadline to deadline. Even this least-common-denominator agreement required brinkmanship and came after weeks of partisan bickering.

77 Percent

The budget deal would raise taxes on 77 percent of U.S. households, mostly because of the expiration of the payroll tax cut, said the nonpartisan Tax Policy Center in Washington.

The heaviest new burdens in 2013, compared with 2012, would fall on top earners who face higher rates on income, capital gains, dividends and estates. The top 1 percent of taxpayers, or those with incomes over $506,210, would pay an average of $73,633 more in taxes, the Tax Policy Center said.

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House Speaker John Boehner, an Ohio Republican, called lawmakers back from holiday vacations to meet yesterday in Washington.

Compared with continuing current policies, the agreement would increase taxes by $620 billion and cut spending by $15 billion, according to people familiar with the negotiations.

The deal passed by the Senate would raise tax rates on income of individuals above $400,000 and married couples above $450,000. That’s double the individual threshold Obama campaigned on and 80 percent higher than his preferred level for married couples.

Capital Gains

The top rates on capital gains and dividends would increase to 23.8 percent starting at the same income thresholds, including a 3.8 percent tax that starts today on top earners. Limits on personal exemptions and itemized deductions for top earners that had been phased out will return, for individuals starting at $250,000 and married couples starting at $300,000.

Estates would receive a more-than $5 million exemption and 40 percent top rate, splitting the difference on rates between Republicans and Democrats. The exemption would be indexed for inflation. The alternative minimum tax would be permanently fixed to prevent it from expanding to more households.

To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net; James Rowley in Washington at jarowley@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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