Tax-Cut Vote Shows Democratic Divide

By JANET HOOK

WASHINGTON—

The House approved legislation Thursday that would extend current tax rates on income up to $250,000 while allowing taxes on higher earnings to rise, a largely symbolic vote that pointed to divisions among Democrats in the waning days of their dominance on Capitol Hill.

The House of Representatives today approved legislation to make permanent tax cuts for households earning less than $250,000. Neal Lipschutz discusses the significance of the vote and why he believes the rich will also see a tax cut extension.

The bill passed 234-188, but 20 Democrats opposed it— mostly lawmakers who lost on Election Day and who agree with Republicans that it is bad policy to let any tax rates rise amid a fragile economy. Three Republicans voted for the bill.

The legislation is doomed in the Senate, and President Barack Obama has signaled a willingness to give ground to the Republican position. But House leaders called the vote to draw a stark line between the parties while negotiators decide the fate of the 2001 and 2003 tax cuts that are set to expire Dec. 31.

The elements of a possible deal became clearer Thursday, as White House officials told reporters Mr. Obama would insist that any compromise include a one-year, $140 billion package of tax cuts and aid aimed at the poor and unemployed. The aides stopped short of saying their demands were the price for agreeing to extend Bush-era tax cuts for upper-income families.

Senate Majority Leader Harry Reid (D., Nev.) said Thursday he would soon hold votes on alternative tax plans, including one like the House bill and another Democratic plan to extend tax cuts for income up to $1 million. None of those is expected to pass. But Democratic aides say that once those symbolic votes are taken, the way will be cleared to nail down the emerging compromise that could link a temporary extension of all tax cuts to extending jobless benefits or other Obama priorities.

House Democratic leaders scheduled Thursday's vote in part out of frustration with a White House strategy that liberals believe amounted to capitulation to the Republican call to extend tax cuts for the wealthy.

"This is the moment to stand up and be counted on middle-income taxes," said House Ways and Means Committee Chairman Sander Levin (D., Mich.), as he opened the debate.

White House officials say they can't afford to be uncompromising about the tax-cut impasse because time is limited in the lame duck session and Republicans' sway has been enhanced by the midterm elections.

House GOP leader John Boehner (R., Ohio) called the debate on the measure "chicken crap," deeming it a political maneuver designed to portray Republicans as friends of the wealthy and indifferent to the middle class.

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Reuters

GOP Rep. Mike Pence, left, and Sen. Jim DeMint leave a news conference Thursday about their goal of permanently extending Bush-era tax rates.

"This is nonsense," he told reporters before the debate. "The election was one month ago, the next election is 23 months away and the political games have already started trying to set up the next election."

Republicans, emboldened by their election victories, shrugged off any potential political risk and voted against the bill.

"They think this is some clever trap, but they lost the election," said Rep. Steve LaTourette (R., Ohio). "They played this class-warfare theme, but it wasn't successful. They are in charge" for only a bit time more. two more weeks."

Elsewhere in the Capitol, a small, bipartisan group met for a second day seeking a compromise at the behest of Mr. Obama and congressional leaders.

The House vote was part of Democrats' effort to use the final weeks of the lame-duck session to highlight the party's priorities, even if they don't become law. That drive comes at a time when many Democrats are airing frustrations the White House hasn't done enough to define and fight for the party's policies.

Liberals have bristled as the White House has signaled willingness to compromise on upper-income tax rates. Mr. Obama has also proposed freezing federal employees' pay and, so far, failed to win an extension of unemployment benefits.

"There is a general critique of the president that he would do a lot better if he would make clear what he stood for and expressed a willingness to fight for it," said Rep. Anthony Weiner (D., N.Y.).

Democratic divisions surfaced early in the House debate. On a usually routine procedural vote, 33 Democrats voted against bringing the bill to the floor. "This isn't a time to talk about raising taxes," said Rep. Jason Altmire (D., Pa.), who voted against bringing up the bill but supported it on final passage.

The bill would make permanent the current tax rates on incomes of less than $200,000 for individuals and $250,000 for couples. It also would extend other elements of the tax cuts, including lowered rates on capital gains and limits on the alternative minimum tax.

Republicans want to include an extension of the lower tax rates for upper-income brackets as well, saying an increase would hurt small businesses and the broader economy. Democrats argue the deficit-ridden federal government can't afford the resulting $700 billion revenue loss.

In describing the White House wish-list for a tax compromise, aides said they would seek around $56 billion for a 13-month extension of unemployment insurance.

They are also seeking a one-year package that would include $60 billion for an extension of the Making Work Pay tax credit of $400 for middle-income individuals and $800 for couples; $6 billion to extend the American Opportunity Tax Credit for tuition expenses; and $3 billion for the earned income and child tax credits that were expanded in last year's stimulus bill to help low-income workers who pay little to no federal income tax.

The White House also wants $15 billion to extend a payroll-tax credit for new hires for one year.