Tax Deal Set to Pass Senate

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The Wall Street Journal
By: John D. McKinnon & Janet Hook
December 13, 2010

Supporters Hope Expected Easy Victory Monday Will Build Momentum in House.

Democrats are predicting that a much-debated tax agreement will clear a crucial hurdle comfortably in the Senate on Monday, with a margin that they hope will add momentum to the deal in the House.

But even with President Barack Obama, former President Bill Clinton and a growing number of Senate Democrats backing the deal, House Democrats remained eager to test whether they could push Republicans to raise the proposed tax rate on estates.

It wasn't clear how far House Democrats would push such a fight. If a bill isn't passed by the end of the year, tax rates are scheduled to go up, although the White House could block an immediate increase in withholding levels, pending passage of a tax bill by a new Congress next year.

Democratic Rep. Chris Van Hollen of Maryland, a top adviser to House Speaker Nancy Pelosi, predicted Sunday that some sort of tax deal would pass in the House before the current session ends.

The House is "very focused on getting a comprehensive tax compromise passed by the end of the year," Mr. Van Hollen said in an interview. If Republicans won't alter the estate-tax provision, he added, "then we have to go from there."

In a separate interview on Fox News Sunday, Mr. Van Hollen said: "We're not going to hold this thing up at the end of the day, but we do think that simple question should be put to test. We're going to ask the Republicans and others, are they going to block this entire deal" over the level of taxes on estates?

Three Senate aides said the tax package appeared likely to attract at least 65 to 70 supporters Monday in a procedural vote in the Senate to test whether there is support to block a potential filibuster. Sixty votes are needed for the bill to cross that hurdle. A vote on final passage is expected a day or two later.

House aides said Democrats' strategy in that chamber would be affected by the margin of the Senate vote.

"If you have 70 people in a bipartisan vote, I don't see a situation where we really play that game of chicken and change [the bill],'' said a senior aide to a House Democrat supporting the legislation.

The deal negotiated by the White House and Republican lawmakers would extend for two years the income-tax cuts signed into law by former President George W. Bush. The agreement would also give most workers a one-year reduction in Social Security payroll taxes and enact a slew of targeted breaks for businesses and individuals.

Under the deal, the estate tax, which has 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.

Many House Democrats argue the deal is too generous to inheritances. Some are arguing to amend the bill to include a top rate of 45%, applied to estates of $3.5 million or more. Another possibility under discussion is introducing and passing a separate bill on the 45% estate tax, then taking up the Senate measure, with its 35% rate, according to a House aide. That could give unhappy Democrats a chance to register their disapproval, without blocking action.

For their part, congressional Republicans vowed to stick to the terms of the deal they struck with Mr. Obama.

Rep. Paul Ryan (R., Wis.), the incoming Budget Committee chairman, suggested that House Democrats would damage the economy in the course of fighting for a higher estate tax.

"They're willing to scuttle the entire agreement--an agreement which has bipartisan support in the Senate, an agreement with the president of the United States to get this [economy] moving and prevent tax increases from hitting our economy, which would be very destabilizing," Mr. Ryan said. "The answer is: No, we're not interested in changing this deal. We're interested in passing this through."

At the same time, Mr. Ryan expressed cautious optimism that House Democratic leaders are discussing holding a vote, after party members called last week for blocking the bill unless changes are made.

Even if the House Democratic leaders decide to push for a higher estate tax, there's no guarantee they would be able to overcome the combined efforts of the White House and congressional Republicans. Almost all the 179 House Republicans are likely to support the current deal's terms. That means the White House needs only about 40 Democrats to assemble a majority of 218.

The White House was working to build support among 52 House Democrats who were defeated in November, many of whom are considered centrists open to compromise on taxes.

One defeated moderate Democrat defended the estate-tax provision in the current deal.

"It is well-designed, and it enjoys sufficient support to pass in the Senate, and we need to work hard to pass it here," said Rep. Rick Boucher of Virginia. Still, he added, "It's going to take work convincing members to support it."

Mr. Obama himself continued lobbying individual lawmakers over the weekend, aides said. On Friday, Mr. Obama also brought former President Clinton to the briefing room to make a pitch for the deal.

On Sunday, several White House advisers appeared on Sunday talk shows to tout the deal.

"This is extraordinarily important for the economy and for people across this country that we not let this get to a Washington-style standoff," said administration adviser David Axelrod on ABC's "This Week."

Some Democratic aides say a strong Senate vote could underscore for House Democrats how limited their options are. Even if House Democrats reject the deal this month, the existing agreement likely would pass the new GOP-run House in January and win approval next year in the Senate, where Republicans will also gain seats.

Some Republicans suggested that the deal might even get worse for Democrats in January if, for instance, Republicans sought spending cuts to offset the cost of some provisions of the deal, such as an extension of jobless benefits for the long-term unemployed.

Write to John D. McKinnon at

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This page contains a single entry by CFED published on December 13, 2010 3:58 PM.

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