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Tax-cut deal clears Senate hurdle in test vote

A clear majority puts pressure on reluctant House Democrats and increases chances Congress will pass the compromise.

December 14, 2010|By Lisa Mascaro, Richard Simon and Kathleen Hennessey, Tribune Washington Bureau

Reporting from Washington — The Senate overwhelmingly advanced President Obama's $858-billion tax-cut package Monday in a vote that heightened pressure on reluctant House Democrats and enhanced the likelihood of congressional approval for the compromise.

The Senate could send the package to the House by midweek and then turn to remaining legislative priorities, including a nuclear arms reduction treaty with Russia, a repeal of the ban on openly gay military personnel and a youth immigration bill.

Still, House Democrats have yet to relent in their opposition to the tax-cut deal between the White House and GOP leaders, and they are expected to demand changes to the bill's estate tax provision, which liberal lawmakers say is skewed to the wealthy.

Yet, as the Senate voted 83-15 to clear a key procedural hurdle, it became increasingly obvious that altering the package in either chamber could delay final votes and jeopardize other top goals before the Democratic-controlled Congress comes to a close at the end of the year.

Obama urged a speedy resolution. "This proves that both parties can in fact work together to grow our economy and look out for the American people," Obama said as the Senate vote was underway.

The tax cuts were passed during the administration of former President George W. Bush. They expire on Dec. 31, and a failure by Congress to extend them would lead to a tax increase on nearly every American worker.

Republicans watched the feud between Obama and congressional Democrats, confident they have little at stake if a resolution is not reached in the days ahead. If taxes go up on Jan. 1, Republicans are convinced the president and his party will be blamed.

Then, with a new GOP majority in the House and greater numbers in the Senate, Republicans could swiftly pass their preferred tax cuts.

Sen. Mitch McConnell (R-Ky.), the Senate GOP leader, said the bipartisan package underscored the new direction in Washington after the fall elections. "This is an important shift, and the White House should be applauded for agreeing to it," McConnell said Monday.

A Pew Research Center poll released Monday showed Americans are largely on board with the package, with 60% of those surveyed in favor and 22% opposed.

The package extends the Bush tax cuts for two years on families at all income levels, including the wealthiest 2% who have incomes above $250,000 a year. Obama once campaigned against tax cuts for those earners.

The package also continues unemployment insurance through 2011 for up to 7 million Americans who otherwise would see their extended jobless aid expire.

One key change for most taxpayers will be a 2-percentage-point reduction in payroll tax worth up to $2,000. It replaces the so-called Making Work Pay tax cut for 95% of Americans, a break that expires Dec. 31.

The package also reinstates the estate tax that lapsed this year under a quirk of law. It establishes a 35% rate on inheritances above $5 million for singles and $10 million for families.

In many ways, the package is a quintessential Washington compromise that leaves lawmakers pleased by some provisions and infuriated by others.

"For all of us it's a balancing act," said Sen. Charles E. Grassley (R-Iowa), who voted yes. "We want to stay true to our ideals, and we also want to deliver practical results to our constituents."

For example, the Senate added $10 billion in energy assistance, including nearly $5 billion in ethanol and coal credits that environmentalists oppose. But it also included an extension of grants for renewable energy developers, which supporters credit with having doubled solar plant production in 2010.

The package also includes a long, $55-billion list of specialty tax breaks that tend to be extended each year — help for Puerto Rican rum makers, racetrack developers and Los Angeles film producers.

Because of the "Christmas tree" assortment of benefits, an increasingly vocal group of conservatives has publicly rejected the plan in recent days. Senate Republicans are seeking an amendment to require spending cuts elsewhere to pay for the $56 billion in jobless benefits.

Tea Party Patriots, a major online network of activists, circulated a petition urging senators to vote against "The Deal" because it violates Republican campaign promises to block tax increases, craft legislation in the open and stop adding to the deficit.

"It was a painful vote," said Sen. Bob Corker (R-Tenn.), who voted yes. "It was not a no-brainer for me. … I'm very concerned about the deficit."

Five Republicans voted against the compromise, largely because they were opposed to adding the $858-billion package to the national debt.

"My time in public office has run out, and from my perspective, so has the country's," said retiring Sen. George V. Voinovich (R-Ohio). "Our national debt is one of the most important problems we face."

Democrats — 10 of whom voted against the deal — remained concerned the package is too heavily tilted toward the wealthy, particularly the $68-billion estate tax provision.

Sen. Carl Levin (D-Mich.) voted against advancing the bill, saying the tax cuts "would exacerbate a growing trend of income inequality in our country."

Democrats noted that the 2-percentage-point payroll tax break did little for families earning less than $40,000, who had received an $800 credit under the expiring Making Work Pay provision.

"My stomach's in a knot," said Sen. Dianne Feinstein of California, among the Democrats who voted yes. "It's far from a perfect bill, but it's what we have."

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