Sweeping tax bill approved by Congress

WASHINGTON - Acting with uncommon speed, Congress sent President Barack Obama sweeping, bipartisan legislation late Thursday to avoid a Jan. 1 spike in income taxes for millions and renew jobless benefits for victims of the worst recession in 80 years.

The historic $858 billion measure also will cut Social Security taxes for nearly every wage-earner and pump billions of dollars into the still-sluggish economy.

The House voted 277-148 to pass the measure, less than 24 hours after the Senate approved it 81-19.

The legislation was the result of a reach across party lines between Obama and top Republicans in Congress - stubborn adversaries during two years of political combat that ended when the GOP emerged the undisputed winner in midterm elections on Nov. 2.

Rep. Ginny Brown-Waite, R-Fla., called it "a bipartisan moment of clarity" as the House moved toward a vote.

Earlier, the House rejected 233-194 a move by Democrats to raise the estate tax above levels agreed to by Obama and Republicans.

The bill would prevent taxes from rising as scheduled for virtually all Americans on Jan. 1, extend jobless benefits for the long-term unemployed and put more money into workers' pockets.

One key component, a one-year, 2 percentage-point cut in the Social Security wage tax, would give workers an average $934 tax break next year.

The measure also would renew 38 expiring tax breaks for various interests including energy companies, teachers and areas devastated by Hurricane Katrina.

And it would increase federal budget deficits and the national debt by $858 billion while giving a boost to the sluggish U.S. economy.

Supporters hailed the bipartisan legislation as the first of its kind in the Obama presidency, and Obama pushed hard for its passage. But it was clear Thursday that rank-and-file members of Congress don't consider the deal a harbinger of a new era of across-the-aisle cooperation.

The march toward final passage stalled Thursday afternoon because of objections from liberal Democrats over the estate tax. The deal would impose a 35 percent tax on individual estates of more than $5 million. Democrats pushed for a 45 percent tax and a $3.5 million threshold.

Many lawmakers were troubled by other parts of the bill, and the House debate often reflected sharp partisan divisions.

Rep. Brad Sherman, D-Calif., said he backed the bill "with great reluctance." Democrats now control the House, but next month Republicans will have a 49-seat majority. If this bill fails and has to be renegotiated, "he'll certainly sign a worse bill next year," Sherman said of Obama.

Republicans weren't satisfied, either.

"This is not a bad deal, but it's not the best deal," said Rep. Joe Barton, R-Texas. "We are making a compromise on the Republican side we do not have to make."

Like many Republicans, he would prefer to make the Bush-era tax cuts permanent.

The centerpiece of the deal crafted by the White House and Republican lawmakers would extend current income-tax rates set in the Bush era for two years.

Democrats had hoped to return the top two rates, now 33 percent and 35 percent, back to previous Clinton-era levels of 36 percent and 39.6 percent for those earning more than $250,000 a year.

Yet they understood that Senate Republicans would block that. So in return for accepting those terms, Democrats got the unemployment-benefit extension, which Republicans had stalled, saying it shouldn't be paid for with new debt but rather with offsetting cuts in other federal spending.

Federal funding for up to 99 weeks of aid expired Dec. 1, and unless it is restored, an estimated 2 million people stand to lose benefits this month.

As for the Social Security payroll-tax cut, the amount of the break would increase with incomes. According to the Tax Policy Center, an independent research center, households where workers earn between $40,000 and $50,000 would get $770 on average; those making $50,000 to $75,000 would get $1,034; those making $75,000 to $100,000 would get $1,413; and those making $100,000 to $200,000 would get $2,072. All estimates are averages per income class.

Workers will pay Social Security tax on the first $106,800 of income next year.

Wire Services December 18, 2010



Sweeping tax bill approved by Congress