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Tax Package Hinges on House

President Barack Obama’s tax cut package may have cleared a major hurdle in the Senate on Monday evening, but the measure is still far from becoming law as House Democrats continue to demand changes.

The Senate’s vote Monday to invoke cloture, ending a filibuster by Sen. Bernie Sanders (I-Vt.), cleared the way for Members to give final approval to the bill tonight. While Majority Leader Harry Reid (Nev.) and Minority Leader Mitch McConnell (Ky.) were negotiating over a handful of possible amendments to the bill, aides in both camps acknowledged that no substantive changes would be made.

“We’re basically locked in,” a Democratic aide said Monday.

The $858 billion plan, struck last week between Obama and McConnell, would extend all Bush-era tax cuts for two years and unemployment insurance benefits for 13 months. 

The deal angered liberal Democrats, particularly in the House, who felt they were left out of discussions and that Obama gave up too much to get a deal. Some Senate Democrats were also upset, but most acknowledged that the package may be the only way to keep taxes from increasing on middle-income Americans and to prevent unemployment benefits from expiring.

Indeed, even a number of vocal Democratic critics of the deal — including Conference Vice Chairman Charles Schumer (N.Y.) and Sens. Claire McCaskill (Mo.), Sheldon Whitehouse (R.I.), Benjamin Cardin (Md.), Debbie Stabenow (Mich.), Mary Landrieu (La.) and Al Franken (Minn.) — ultimately voted to move toward final passage of the plan.

After the vote, many Democrats said the deal was the best they could get, and that too much was at stake to let the measure fail. “We must act. Because if we fail to extend these critical provisions, we place our economy at risk. If we fail to act, we place middle-class families at risk,” Senate Finance Chairman Max Baucus (Mont.) said.

Obama immediately called on the House to “act quickly” on the Senate-passed bill, which he argued would help grow the economy and create jobs. 

And McConnell warned House Democrats against making changes to the Senate-passed package, saying in a statement: “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.”

But the path forward is far from certain in the House. Democratic leaders were searching for a strategy Monday night and were making clear that the White House should not consider them a rubber stamp to the Senate.

“We find the Senate bill in its current form unacceptable, and there will be changes made, especially as they relate to the most egregious provisions, like the estate tax, which puts a $25 billion hole in the deficit — $25 billion over two years — to benefit the wealthiest 6,600 estates,” Rep. Chris Van Hollen (D-Md.) said. “At a time when we’re trying to reduce the deficit, it makes no sense to put us into that kind of debt to China for the wealthiest estates. It wasn’t a necessary part of the deal and shouldn’t be there.”

Democrats privately acknowledged they are engaging in a risky gambit: They want to try to avoid blowing up the tax cut bill completely while still attacking — or at least registering their opposition to — the provisions they find most objectionable, such as those dealing with the estate tax. Speaker Nancy Pelosi (D-Calif.) met Monday with Majority Leader Steny Hoyer (D-Md.), Ways and Means Chairman Sander Levin (D-Mich.) and Van Hollen, the incoming ranking member on the Budget Committee, on the issue. But sources said they didn’t settle on a road map for how to handle the package.

One possible strategy is to amend the estate tax language to impose a 45 percent tax on estates worth more than $3.5 million instead of the 35 percent tax on estates worth more than $5 million that the deal calls for. Democratic leaders might not have enough votes for that change but could temper Caucus unrest by giving Members a chance to register their displeasure with the original language.

“The approach here would be to allow Members to weigh in and get on the record on portions of the package that they believe are unwise,” a senior Democratic aide said.

“This is not the best deal we could have gotten, so let’s be on the record on making that clear.”

A Democratic leadership aide blamed the White House for not doing enough to bolster the Democratic narrative on extending the tax cuts.

“One of the main frustrations is that the White House failed to effectively define the debate and differentiate the Democratic position from the Republican position on this issue,” the aide said. “So making changes to the package would allow House Democrats to better define the debate in ways that the White House failed to.”

Such an approach would mimic one House leaders took earlier this month when they held a symbolic vote on extending the middle-income cuts. That proposal failed, but Pelosi and other House leaders touted the vote as a measure of their commitment to helping working Americans.

“There’s talk about having an amendment or multiple amendments to address some of the provisions in the package that Democrats have a real problem with,” the senior Democratic aide said.

Hoyer, speaking Monday at the National Press Club, said he remains “hopeful” that the House could wrap up business and adjourn for the year Friday. But he added that the House could make changes to a Senate tax cut bill, forcing it back to the Senate for consideration. 

“We want some way for Members to be able to express their opinion,” another senior Democratic aide said. “But at the same time, I think there’s an expectation that we will send something to the president by the end of the year.”

Anna Palmer contributed to this report.

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