Tax-Cut Vote in House Delayed by Procedural Dispute

Louise Slaughter
“We’re perfectly aware” that passage of the estate-tax amendment would send the measure back to the Senate, said House Rules Committee Chairwoman Louise Slaughter, a New York Democrat. Photographer: Matthew Staver/Bloomberg

U.S. House plans to vote on President Barack Obama’s $858 billion agreement to extend Bush-era tax cuts were delayed today because of a procedural dispute over the rules for debate.

Many House Democrats opposed a debate structure offered by the Rules Committee that would have required lawmakers who want to increase the estate-tax rate in the bill to simultaneously approve the entire tax-cut measure.

Lawmakers objected because it “would not give them a clean yes or no vote on the Senate bill,” said Vermont Democrat Peter Welch, who opposes the legislation. He predicted the measure would pass once the procedural dispute is resolved.

Income taxes will increase across-the-board on Jan. 1 if Congress does not pass a bill for Obama to sign.

House Democrats scheduled a caucus today to discuss how to proceed. Oregon Representative Peter DeFazio said he and other Democrats want broader changes to the bill, such as a $250 cost-of-living payment to Social Security recipients, in addition to the proposed estate-tax amendment.

“If you’re going to have a fight that you’re going to lose, have it about something that really reflects Democratic values,” said Kentucky Democrat John Yarmuth.

The $858 billion tax-cut plan extends through 2012 all Bush-era tax reductions on income, capital gains and dividends. It continues expanded unemployment insurance benefits through 2011, cuts payroll taxes by 2 percentage points during 2011 and lets businesses write off 100 percent of capital investments between Sept. 9, 2010, and Dec. 31, 2011. Obama agreed on the plan with Republicans on Dec. 6.

Estate Tax

Provided a rule is approved, Democrats would debate the tax-cut measure and a proposal to amend it with a higher estate tax that Senate Republicans say they will refuse to accept. The Senate passed its version of the measure yesterday, 81-19.

Republicans said any significant changes made by the House would be rejected in the Senate and would risk scuttling the entire agreement.

“We’re perfectly aware” that passage of the estate-tax amendment would send the measure back to the Senate, Rules Committee Chairwoman Louise Slaughter of New York said yesterday. Asked whether the higher estate tax would pass, Democratic Representative Chris Van Hollen of Maryland, an assistant to House Speaker Nancy Pelosi, said, “I know that there’s strong support for it.”

‘A Done Deal’

Others said they doubted there would be enough support for the estate-tax proposal, and the House will likely clear the Senate-passed measure and send it to Obama for his signature.

“This has been a done deal for a while,” said House Agriculture Committee Chairman Collin Peterson, a Minnesota Democrat. He called the speculation over the estate-tax proposal “just a lot of gnashing of teeth” as he left a meeting of House Democrats today.

House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said today he will vote for the estate-tax provision though “I don’t expect it to pass.” He predicted it and will be defeated by House Republicans and some Democrats.

Representative Jesse Jackson Jr., an Illinois Democrat, said many Democrats realize that Obama reached the best deal he could with Republicans. “We’re raising the question of ‘at what cost?’” if the bill were to be defeated, he said.

Capital Gains

The Senate-passed measure sets the top estate-tax rate at 35 percent and gives families a $5 million tax-free allowance per individual, or $10 million per couple.

House Democrats threatened last week to refuse to bring the tax plan to the floor if it remained unchanged, and they focused much of their ire on the estate tax provision. Many House Democrats also wanted to limit the income tax cut extension to the first $250,000 of family income.

House Democratic leaders have sought to find a way to allow members to demonstrate their opposition without actually amending the bill.

The Democrats’ estate-tax proposal would set the top rate at 45 percent with a $3.5 million per person tax-free allowance. The House passed such a rate in December; that proposal died in the Senate.

Blue Dogs

The House vote on the estate tax last year was 225-200, with 26 Democrats opposed. The 54 members of the fiscally conservative Blue Dogs have pressed this week for approval of the Obama-Republican compromise. Democrats control the House 255-179, with one seat vacant. Republicans will take over the majority in January.

Barring congressional action, the estate tax in January will have a top rate of 55 percent that applies after a $1 million tax-free allowance.

The legislation extends dozens of expired and expiring tax breaks, including the research and development tax credit and a college tuition tax credit that was created in last year’s economic stimulus law.

The Senate passed the tax-cut plan with broad support from Democrats and Republicans, and some rank-and-file House Democrats say it is unlikely to be changed.

If the tax cuts expire, payroll withholding would increase in January, taking more money out of workers’ paychecks and causing administrative challenges for the Internal Revenue Service. The new Congress would take up the tax issue, and the outcome would be controlled by a Republican-led House and a Senate with 47 Republicans, up from 42 now.

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