President Barack Obama would veto a tax and spending proposal presented by House Speaker John Boehner because it would put “too big a burden on the middle class,” White House Communications Director Dan Pfeiffer said.
“Millionaires would see a tax break of $50,000, while eliminating tax cuts that 25 million students and families struggling to make ends meet depend on,” Pfeiffer said in a statement today. It also would “deeply” cut Medicare, he said.
The House may vote tomorrow on Boehner’s “Plan B,” which would raise tax rates on income over $1 million, rather than the $400,000 threshold the president proposed in his latest offer.
With his push for a vote on his proposal, Boehner is looking to pressure Obama to accept deeper spending cuts and a higher threshold for rate increases by showing how hard it will be to win Republican support for any tax increase. Unless Congress acts, more than $600 billion in tax increases and spending cuts will begin next month.
“Right now we need to do something to get the president’s attention,” Representative Frank Lucas, an Oklahoma Republican, said in an interview. Boehner’s approach “might just help,” he said.
Putting Republicans on record in support of a higher rate for some top earners might insulate Boehner and his party from blame if no deal is reached with Obama and taxes rise starting Jan. 1 as part of the so-called fiscal cliff.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, said today that Obama has squandered the chance to craft a broader solution with Republicans.
“Speaker Boehner, like me, would like to prevent a tax hike on everyone,” McConnell said on the Senate floor. “But given the president’s failure to act, the House will soon vote on legislation to prevent a tax hike on anyone making less than a million dollars a year, rather than letting taxes go up on every American taxpayer.”
“A lot of things right now are for the dynamics of the negotiation,” said Missouri Senator Roy Blunt, who previously served as House Republican whip. “We’re down to a fairly narrow question here. I would hope that the president and the speaker could negotiate the end of that difference.”
Boehner first signaled openness on Dec. 14 to tax rate increases on income over $1 million, marking progress in what had been a primary stumbling block in his talks with Obama.
The speaker’s proposal would permanently extend current tax rates on incomes below $1 million a year and prevent the expansion of the alternative minimum tax. Based on studies of previous proposals, the bill would raise between $300 billion and $400 billion over the next decade, though an official estimate wasn’t available as of last night.
The plan would set tax rates for capital gains and dividends at 20 percent on income higher than $1 million. A tax already set to take effect in 2013 would push the total top rate on investments to 23.8 percent. The bill would continue current estate-tax rules that set the per-person exemption at $5.12 million, indexed for inflation, with a top rate of 35 percent.
“I see this as getting something on the floor before Christmas that lets as many taxpayers know as possible that their taxes aren’t going up,” said Representative Steve LaTourette, an Ohio Republican.
House Rules Committee staff members worked last night to prepare a text of the measure to set up a possible vote tomorrow.
Getting the votes to pass Boehner’s proposal in the Republican-led House won’t be easy. For years, most Republican lawmakers have fervently opposed any tax increases. And Democrats have said they will oppose the Boehner measure, dismissing it as a political ploy which falls short of generating enough revenue.
Ohio Representative Jim Jordan, chairman of a House Republican group that promotes small government, said yesterday it was “a mistake for the Republican Party” to endorse higher tax rates on anyone. Meanwhile, House Minority Leader Nancy Pelosi, a California Democrat, predicted that her caucus members “would be unified in rejecting” Boehner’s proposal.
Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, said on CNN today that Boehner came up with his alternative proposal because he was “not able to get the very extreme Tea Party members of his caucus to go along” with his initial negotiations with the White House.
“I don’t like it,” Van Hollen said of Boehner’s plan. “I don’t think the president prefers it. But everyone’s trying to find a way to get to ‘yes.’”
Following a closed-door session last night in which Boehner attempted to sell his plan, Minnesota Republican Representative John Kline said “there is an understanding” that “absent action, we are going to be faced with a huge, huge tax hike.”
A vote on Boehner’s proposal also could provide him with political cover within his caucus to eventually back a revised agreement with Obama that would require more Democratic votes.
Still, Representative Mike Simpson, an Idaho Republican, said “some people didn’t think the strategy was the right strategy.”
Boehner is using the vote as a pressure tactic against Obama and to convince members of his own party that “he is not going to fold completely,” said Rutgers University political scientist Ross Baker.
“It’s important for him to keep his most conservative members at bay” while he negotiates with Obama, Baker said.
Some lawmakers expressed concern over having a separate vote, as House leaders are considering, on extending tax cuts for those earning under $250,000 a year, Representative Mike Coffman, a Colorado Republican, said in an interview.
“There was certainly some resistance as to doing $250,000 when what we clearly want is under $1 million,” Coffman said.
Obama’s original negotiating position called for a tax-cut extension to apply below the $250,000 mark.
Fifty-three percent of Americans say the country will experience major economic problems if no deal is reached, according to a CBS News poll conducted Dec. 12-16. The poll showed that 47 percent blame Republicans in Congress for gridlock, compared with 24 percent who put the onus on Obama and other Democrats.
The survey of 1,179 adults had a margin of error of plus- or-minus three percentage points.
The American Payroll Association is asking the Treasury Department to freeze paycheck withholding at 2012 levels while Congress continues to debate the 2013 rates. Treasury, which has the authority to set tables, hasn’t responded, the group said.
The Standard & Poor’s 500 Index added less than 0.1 percent to 1,446.97 at 9:34 a.m. in New York. The benchmark index has gained 15 percent so far this year. The Dow Jones Industrial Average slid 2.5 points to 13,348.43. The benchmark 10-year Treasury bond yield was 1.82 percent at 8:15 a.m. New York time after yesterday touching 1.85 percent, the highest level since Oct. 25, according to Bloomberg Bond Trader prices.
Representative Steve Womack, an Arkansas Republican, said Boehner’s “capacity to play his hand is diminished” because Democrats control the Senate and the White House.
“I totally understand the speaker’s dilemma,” Womack said. “The Senate is in the Democrats’ hands so we have a very difficult negotiating position.”
Senate Majority Leader Harry Reid, a Nevada Democrat, and other Senate Democrats were among those rejecting Boehner’s plan. The measure “can’t pass the Senate,” Reid said.
Representative Pat Tiberi, an Ohio Republican, said House passage of Boehner’s proposal would put pressure on Senate Democrats to act.
Under that scenario, he said, “the ball’s in Harry Reid’s court.”
Representative Mick Mulvaney of South Carolina and several other Republicans leaving last night’s party meeting wouldn’t comment.
“I’m just tired of talking about it,” Mulvaney said. “I’d rather talk about golf.”
© Copyright 2014 Bloomberg News. All rights reserved.