House Passes Bush Tax Cut Package; Bill Now Goes to President

The House voted 277 to 148 Thursday to temporarily extend the Bush tax cuts, continue unemployment benefits for 13 months and approve a series of smaller tax credits, cuts and extensions.

A coalition of 112 Democrats and 36 Republicans voted against the measure, while 139 Democrats and 138 Republicans voted for it.

Because the Senate passed the identical measure on Wednesday, the legislation now goes to President Obama for his signature Friday.

The bill's passage marks a significant victory for Obama, who struck out on his own last week to forge a compromise with Senate Republican leaders that he believed could pass before the end of the year.

But it is has also created a wedge of distrust between the president and liberals in the House, who had pinned their hopes for a progressive agenda and feel that he has stopped fighting for their dream.

House leaders felt the fury of the liberal opposition to the package Thursday as they stumbled going into votes setting the parameters of the debate and realized they did not have enough support to get past the procedural hurdles. The leadership regrouped in the afternoon to devise a process that liberal Democrats could support. After the caucus meeting, which Rep. Louise Slaughter (D-N.Y.) called "raucous," the House resumed debating the bill until its passage just before midnight.

The bill will extend the expiring Bush tax cuts for all income levels for the next two years. Specifically, it will continue the 10 percent tax bracket and keep the brackets of 25 percent, 28 percent, 33 percent and 35 percent, instead of reverting to 28 percent, 31 percent, 36 percent and 39.6 percent. It will also continue to tax capital gains and dividends at 0 percent and 15 percent, depending on income, instead of letting the rates go back to 10 percent and 20 percent for capital gains and marginal tax rates for dividends.

The legislation also temporarily cuts the 6.2 percent payroll tax for all workers to 4.2 percent and extends unemployment benefits for 13 months for Americans out of work up to 99 weeks.

The bill continues dozens of tax breaks and credits for people from the bottom of the income spectrum to the top. It patches the Alternative Minimum Tax for two years; extends the college tuition tax credit, child tax credit and Earned Income Tax Credit for two years; allows businesses to deduct 100 percent of certain investments in the first year; and provides a buffet of tax credits to businesses and industries from filmmakers to rum producers to coal miners and railroad operators.

Particularly galling to liberal Democrats, the bill also sets the estate tax at 35 percent for estates valued at more than $5 million, well below the 45 percent rate on estates over $3.5 million that most Democrats had been pushing for.

Some Republicans who supported the measure did so with reservations.

"I don't like this bill that's before us, but I like even less the idea of increasing the tax burden on working Americans," said Rep. David Drier, the top Republican on the Rules Committee, who voted for the bill.

But Drier's Republican colleague, Rep. Mike Pence of Indiana, rose to say he would oppose it because the extensions did not go far enough.

"It's a bad deal for taxpayers; it will do little to create jobs and I cannot support it," Pence said. "This is a tough call. No Republican in this Congress wants to see taxes raised on any American, but uncertainty is the enemy of prosperity."

In an unusual twist, Pence found himself on the same side of the issue as dozens of liberal Democrats, who objected to several parts of the bill.

Rep. Sheila Jackson Lee (D-Texas) said the overall package would not help working people enough, while it would help the wealthy more than they needed.

"This is not about fighting against someone who has a few more dollars than the next person," she said. "It is to do what we're sent here to do, which is to make sure that this capitalistic system works for everybody, including those who are not employed."

Rep. Jerrold Nadler (D-N.Y.) warned that the president's compromise with Republicans was about much more than tax cuts -- it was part of a long-term plan to change the role of government in Americans' lives.

"It would be the culmination of a 30-year Republican effort to starve the beast to deliberately create huge deficits in order to provide the political cover for reducing expenditures for education housing, Social Security, and Medicare."

The price tag for the two-year tax cut bonanza has been estimated at $860 billion, a cost that several Democrats, including Rep. Peter DeFazio (D-Ore.), said was too high.

"Every other major industrial nation on Earth is talking about buckling down a little bit and austerity measures and having a sustained recovery. But no, not here!" he yelled on the House floor just before the vote. "We got out the credit card. And guess what? Our kids and grand kids are going to be paying that bill for 30 years."