Tax Plan Spurs Deal Making

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The Wall Street Journal
By: Janet Hook & John D. McKinnon
December 8, 2010

WASHINGTON--The sweeping tax package negotiated by President Barack Obama and Republican lawmakers gained new momentum toward passage in the Senate, building pressure on balking House Democrats to accept the controversial deal.

The framework of the package seems likely to remain intact, but lawmakers and lobbyists were trying to attach favored provisions into what is likely to be one of the biggest bills to pass the lame duck Congress. Potential additions include a grant program for clean-energy projects that expires at the end of this year.

The scramble to get such provisions included was a sign of growing support for the deal. Senate leaders worked to finish drafting the details of the legislation and prepared for a floor debate as early as Friday, only days after Mr. Obama unveiled the framework for the tax package on Monday.

The prospect of the tax cuts' passage, and of potentially higher deficits, helped push up the U.S. government's borrowing costs. The yield on the 10-year Treasury bond, a benchmark for U.S. consumer and corporate borrowings, hit its highest level since June, peaking at 3.33% before settling at 3.236%.

In the House, Democratic leaders continued to withhold support. Vice President Joe Biden visited Capitol Hill's most hostile quarter--the House Democratic Caucus--where senior members have strongly objected to provisions in the tax package benefiting upper income taxpayers.

But Mr. Biden bluntly told House members that the deal was done and unlikely to be significantly changed, according to participants in the meeting.

"The White House made a deal, and it's emboldened the Republicans,'' said Rep. Jim McGovern (D., Mass.), an opponent of the agreement. "It's hard to roll back."

Some Democrats are hoping to make the bitter pill easier to swallow by securing other provisions they favor. Sen. Maria Cantwell (D., Wash.) and 20 other senators, nearly all Democrats, were pushing for the clean-energy grant program, which many Republicans oppose.

Senate Majority Leader Harry Reid (D.Nev.) has floated a proposal to legalize Internet poker, but the idea is opposed by a leading architect of the tax deal, Sen. John Kyl (R., Ariz.). "It's not going to happen,'' Mr. Kyl said.

A group of Democrats wants an extension of the Build America infrastructure bond program, but many lawmakers concede it may die due to Republican opposition. The bond program, set to expire Dec. 31, provides federal subsidies for taxable bonds issued by state and local governments. Some opponents say it's a bad idea to give those governments incentives to take on additional debt.

Some conservative Republicans warned Wednesday that they may vote against the deal, citing its deficit spending and renewal of the estate tax. Sen. Jim DeMint (R., S.C.) broke ranks with party leaders to oppose the bill, and Sen. Tom Coburn (R., Okla.) said his support was in doubt.

But such GOP defections are expected to be few, and Senate Majority Whip Dick Durbin said that Democratic opposition was waning as lawmakers learned more about the details of the deal and its potential economic impact.

"Members are more open today as they read the analysis of the package,'' said Mr. Durbin, who had been among the most vocal critics of a central provision in the deal that would extend Bush-era tax cuts for upper-income brackets.

Mr. Kyl said work to write the legislation could finish as early as Thursday. He insisted that there would be no big changes to the framework unveiled earlier this week by Mr. Obama. "There is no end to the number of things people would like,'' Mr. Kyl said of the emerging legislation. "This is the deal and nothing but the deal.''

Still, Mr. Durbin said Democrats discussed changes they would like when they met midday Wednesday with administration officials, including White House budget director Jacob Lew.

White House officials said Wednesday that they didn't oppose adding elements but suggested it would be difficult to do without jeopardizing Republican support. "If somebody can figure out how to change this thing and keep everybody happy," that would be fine with the White House, said Robert Gibbs, press secretary to Mr. Obama.

Mr. Obama and congressional Republicans laid out the framework for the legislation earlier this week, announcing a deal that would grant a two-year extension of income tax cuts for all taxpayers that are due to expire at year's end.

Mr. Obama had wanted an extension only for couples earning up to $250,000, saying cuts for higher earners were unaffordable. Republicans wanted no such limit, saying no one's taxes should rise while the economic recovery is weak.

The deal includes a 13-month extension of lapsed federal jobless benefits and a temporary cut in the worker's share of the Social Security payroll tax. It would extend a raft of other tax cuts aimed at middle-class taxpayers, including a two-year provision to shield most Americans from the Alternative Minimum Tax.

The most controversial provision would restore the estate tax at a top rate of 35% rate for two years, and only for estates over $5 million. The estate tax has been eliminated for this year and was due to be revived in 2011 at a rate of 55% on estates over $1 million.

--Patrick O'Connor, Martin Vaughan and Laura Meckler contributed to this article.

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This page contains a single entry by CFED published on December 9, 2010 4:02 PM.

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