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House Sets Vote Tomorrow on Tax Cuts as Talks Begin

U.S. Treasury Secretary Timothy Geithner
Jacob Lew, director of the Office of Management and Budget, left to right, Timothy Geithner, U.S. treasury secretary, and Representative Chris Van Hollen, a Democrat from Maryland, talk during a meeting of White House, Treasury Department, Senate, and House leaders to discuss tax cuts in Washington, D.C. Photographer: Andrew Harrer/Bloomberg

House Democrats scheduled a vote tomorrow on their plan to extend middle-class tax cuts and let them expire for higher-income Americans as lawmakers and the Obama administration sought a bipartisan compromise.

Negotiators discussed “everything on the table,” Treasury Secretary Timothy Geithner told reporters after the first of two meetings in Washington today. The discussions were “civil” and “constructive,” he said. Senator Jon Kyl, an Arizona Republican, described the talks as “congenial, potentially productive.”

Democrats announced their plan for a House vote tomorrow which would force Republicans to choose whether to support extending tax cuts just for the middle class. Senate Republicans, meanwhile ratcheted up pressure for extending the cuts for all taxpayers. Republicans told Majority Leader Harry Reid they will refuse to move forward with any legislation until the Senate votes to extend the tax cuts and fund the government’s continued operation.

“It is a shame that what we have agreement on is being held hostage by that on which we do not have agreement,” said House Majority Leader Steny Hoyer, a Maryland Democrat. “The American public wants us to find places for agreement” and “nobody wants working Americans to get any kind of an increase on Jan. 1.”

‘Good Start’

President Barack Obama and many Democrats want to retain the lower rates for individual annual income of up to $200,000 and married couples earning as much as $250,000 a year. Under the president’s proposal, the lower rates would expire for income above those figures. Republicans support extending the tax cuts permanently for all income levels.

Obama said he’s “confident” that lawmakers will be able to reach agreement on extending the tax cuts.

The talks “got off to a good start” even if “there’s going to be some lingering politics that have to work themselves out,” he told reporters at the White House.

During the meetings, Democrats insisted on extending the tax cuts only for the middle class, and the administration pressed for resolution by the end of the year, according to a person with knowledge of the discussions who spoke on condition of anonymity.

Hoyer’s announcement drew immediate criticism from House Republicans, who charged it was contrary to the spirit of bipartisan cooperation that Obama tried to foster yesterday during a meeting with congressional leaders.

‘Stalling Tactic’

Representative John Boehner of Ohio, who will become speaker when the new Congress convenes in January, called the planned vote a “Washington stalling tactic with job-killing implications.”

“This is nothing more than political chicanery and undermines the president’s ongoing discussions and efforts on tax rates,” House Republican Whip Eric Cantor said in a statement. The Virginia lawmaker called the measure “a non-starter.”

Opposition from some House Democrats may thwart efforts by Hoyer and other leaders to pass the middle-class tax cut. Democrats Artur Davis of Alabama and Earl Pomeroy of North Dakota said they would vote against the measure unless it extended tax rates for everyone.

“It’s clear that they are struggling to find the votes for it,” said Davis, who didn’t seek re-election.

Pomeroy, who was defeated, said the House should extend all tax cuts temporarily because “the governing mandate of this Congress is over.”

Raise Revenue

Washington Democrat Jim McDermott said he was concerned that extending the tax cuts would expand the deficit. “We’re shooting ourselves in the foot,” he said. “We’re going to have to raise revenues sometime or this country’s going down the tubes.”

Hoyer defended the planned vote, saying Republicans and Democrats “have common ground” on middle-class tax cuts. “I don’t know of anybody in the House of Representatives” who “believes we ought to increase taxes on those folks,” he said. Nor would a House vote on taxes “undermine negotiations on a compromise,” he said.

The House legislation also would include provisions to ensure that couples don’t pay a penalty for being married as well as a tax credit for child care, Hoyer said.

Michigan Republican Dave Camp, one of the lawmakers negotiating with Democrats, said he would oppose the House measure because he objects “in principle” to separating the issues of extending tax cuts for middle-class from the wealthiest Americans.

‘Run the Clock’

Senator Richard Durbin, an Illinois Democrat, said Republicans are “trying to run the clock out” on a strategic arms reduction treaty with Russia by vowing to block anything that isn’t related to tax-cut extensions. Republicans will have six more seats in the Senate in January.

Obama has said he wants the treaty ratified before Congress adjourns.

“They’re trying to make sure we can’t get started on the START treaty,” Durbin told reporters. Asked if it “poisons the well” on tax-cut negotiations, he replied, “it’s not helpful.”

Obama appointed Geithner and Budget Director Jack Lew to broker a deal with lawmakers that seeks to avoid expiration of all of the 2001 and 2003 tax cuts on Dec. 31.

Along with Kyl, the Senate’s No. 2 Republican, and Camp, who will be chairman of the tax-writing House Ways and Means Committee in January, negotiators include Montana Senator Max Baucus, the Democratic chairman of the Senate Finance Committee, and Chris Van Hollen of Maryland, a member of the House Democratic leadership.

Tax Breaks

In addition to the income tax cuts expiring this year, lawmakers face pressure to revive tax breaks that expired at the end of 2009. That includes a “patch” to prevent the expansion of the alternative minimum tax and tax breaks for state and local sales tax and college tuition.

In today’s negotiations, “a lot of items were put on the table, which are all tax-extender related,” Baucus told reporters. He declined to give specifics.

IRS Commissioner Douglas Shulman warned in a letter to lawmakers that failure to act on those measures could pose operational challenges for the IRS and taxpayers in the tax- filing season.

Democratic leaders faced some pressure to hold the vote as a means of testing Republican mettle to oppose legislation that would retain lower rates for middle-income taxpayers.

“I’m not talking about compromise,” said Senator Jeff Merkley, an Oregon Democrat. “We should go to the floor and have the vote on $250,000.”

Hoyer said the House vote tomorrow isn’t “intended to embarrass or put Republicans in a difficult place.”

Massachusetts Democrat Richard Neal said he was eager for a vote. “We’re near the big moment,” Neal said. “Both sides want to get a vote up on the board.”

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