The Wall Street Journal
By: Janet Hook & Martin Vaughan
December 15, 2010
WASHINGTON--The final obstacle to President Barack Obama's tax deal--the opposition of House Democrats--appeared to be melting away Tuesday as strong Senate support for the legislation turned up pressure on liberal critics to concede.
"It's a fast-moving train," said Rep. Peter Welch (D., Vt.), who has led opposition to the legislation to extend the Bush-era tax cuts for all income groups. "The momentum is all in its favor, that's for sure."
Rep. Jim McDermott (D., Wash.) called the bill "just awful." He said the bill includes elements he supports, but that it remains a bitter pill to swallow.
"I still have to eat the estate tax and an extension of tax benefits to people above $250,000, and an extension of unemployment benefits for only one year, said Mr. McDermott. "When you put those three elements together, I have a hard time getting excited about what's on the Christmas tree," said McDermott.
On Monday, the Senate voted 83-15 to advance the tax bill, which would block an across-the-board income tax increase Jan.1 and extend lapsed unemployment benefits, among other provisions. A final Senate vote approving the bill, likely by a similarly wide margin, was expected late Tuesday night or Wednesday morning.
House Democratic leaders are expected to bring up the bill as early as Wednesday and allow a vote on an amendment to raise the bill's estate-tax rate, which liberals believe is too low. But Democratic critics concede that odds of the bill changing are long.
"The clock's ticking, the end of the year is here, and members are looking at this as the last proposal," said Richard Neal (D, Mass.), a senior member of the House's tax-writing Ways and Means Committee. "My guess is it probably gets a fair number of Democratic votes in the House."
The deal is expected to be supported by most of the House's 179 Republicans, though conservatives, including potential GOP presidential candidates Mitt Romney and Sarah Palin, have criticized it for not making the Bush-era tax cuts permanent and for not offsetting the cost of the 13-month extension of unemployment benefits.
Support for the deal is also strong among House Democrats in the 54-member Blue Dog Caucus, a coalition of conservatives and centrists. Members of the group Tuesday circulated a letter to House Democratic leaders urging quick action on the tax package without change.
"It is time for us to put aside the partisan talking points and accomplish what the American people sent us here to do," said the letter, which was signed by 31 Democrats.
House Majority Leader Steny Hoyer (D., Md.) said he expected Democratic support for the deal to reach beyond the party's conservative wing because he believed there were "compelling reasons" to support it, such as the unemployment-benefits extension, a 2 percentage-point cut in payroll taxes and tax credits for college tuition expenses by middle income families.
To address liberal concerns that the bill is too generous to wealthier Americans, House Democratic leaders are expected to allow a vote on an amendment to change the estate tax provisions. If the amendment passes, it would send the legislation back to the Senate for reconsideration. GOP leaders promised such a move would blow up the deal.
"If the House Democratic Leadership decides to make partisan changes, they will ensure that every American taxpayer will see a job-killing tax hike on January 1st," said Senate Minority Leader Mitch McConnell in a written statement Monday evening.
Mr. Welch said even a change to the estate tax would be "cosmetic," given the tax deal bill's overall cost. Congressional budget analysts estimate that the package would add $858 billion to the deficit over ten years.
For many Democrats, a vote to change the estate tax is far from enough to address their wide ranging complaints about the bill. Rep. David Wu (D.Ore) argues that Congress should not be extending tax cuts for the upper income brackets for a longer period than it extends unemployment benefits.
Under the deal, the estate tax, which had been eliminated for 2010, would be reinstated next year at a top rate of 35% and applied to estates above $5 million. Without action, the rate is scheduled to spring to 55% next year and apply to estates above $1 million.
Most Republicans favor total repeal of the sales tax. Having failed for years to achieve that goal, they have backed the lowest possible tax rate on inheritances.
Many House Democrats have backed an alternative that would set a rate of 45%, applied to estates of $3.5 million or more.
A similar proposal from Rep. Earl Pomeroy (D., N.D.) came before the House a year ago and passed 225-200. But Democratic aides said it was not clear it would get that many votes if offered as a change to the Senate bill, given the potential mess such a move would create.
Rep. Jim Costa (D., Calif.) voted for the Pomeroy bill in 2009 but, as an advocate of full repeal of the estate tax, is not likely to support it as an alternative to the lower rate in the Obama tax deal.
Write to Martin Vaughan at email@example.com