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Obama Tax Deal Clears Hurdle by Passing in Senate

Wednesday, 15 Dec 2010 01:20 PM


The deal that President Barack Obama and Republicans struck to extend expiring tax cuts for millions of Americans and stimulate the sluggish U.S. economy got the needed majority of votes for passage in the Senate on Wednesday.

The legislation now goes to the House, where many of Obama's fellow Democrats are still angry with him for cutting the deal with Republicans without them. A bid among some Democrats to tighten an estate tax provision to make it less generous for the wealthy is expected to fail, which would clear the way for likely final passage of the tax deal this week.

The House could start debate on the bill as early as today.

The plan extends for two years all Bush-era individual tax rates, prevents a spike in taxes on capital gains and dividends and renews long-term jobless insurance, while providing new tax relief for students, working families, and businesses.

Obama, whose party lost ground to the Republicans in November's midterm elections, tried to make up with the business community at a meeting with about 20 top CEOs Wednesday.

Earlier Wednesday, he urged lawmakers to approve the tax bill.

"I am absolutely convinced that this tax cut plan, while not perfect, will help grow our economy and create jobs in the private sector,'' Obama said.

Particularly irksome to Democrats has been a provision raising the exemption threshold for the estate tax from the 2009 policy of $3.5 million to $5 million, and cutting the tax rate from 45 percent to 35 percent.

"It's hard to believe they think it's wise to give a windfall to heirs such as Paris Hilton,'' Democratic Rep. Chris Van Hollen, an assistant to House Speaker Nancy Pelosi, wrote in The Washington Post Wednesday.

The deal in the Senate leaves out renewal of a popular bond program expiring this month, Build America Bonds, which funds infrastructure projects, favored by Democrats, cities and investors. It will also leave intact an ethanol tax credit, thwarting efforts by some lawmakers to weaken it.

Many economists predict the tax package could boost growth by up to 1 percentage point next year, citing in particular a one-year cut in the payroll tax and removal of uncertainty about taxes in general.

But deficit hawks warn that the tax bill deepens the nearly $14 trillion federal debt.

Worries about the bill's potential impact on the federal deficit prompted a two-day sell-off of U.S. Treasury bonds last week. On Wednesday, Treasury prices rose after recent price declines lured buyers.

© 2015 Thomson/Reuters. All rights reserved.

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