The U.S. House of Representatives voted to extend tax cuts through 2013 for all income levels, defying a veto threat from President Barack Obama.
The 256-171 vote, mostly along party lines, continues a stalemate on tax policy that lawmakers say will last beyond the Nov. 6 election. Nineteen Democrats voted for the Republican bill, and one Republican was opposed. The measure won’t advance in the Democratic-led Senate.
“The choice Republicans have made is to pass this bill, work toward comprehensive tax reform and create jobs,” said Representative Dave Camp, a Michigan Republican and chairman of the House Ways and Means Committee. “Now is not the time to dig the hole we’re in any deeper.”
Obama and congressional Democrats want to let the tax cuts expire for top earners, and each side is accusing the other of holding the country hostage to get its way.
If Congress doesn’t act by the end of the year, tax rates for income, capital gains, dividends and estates will increase for all taxpayers. The top income tax rate would increase to 39.6 percent from 35 percent, and the top rate on capital gains would rise to 23.8 percent from 15 percent.
The tax increase is part of the $607 billion so-called fiscal cliff of automatic spending cuts and revenue changes in 2013 that the Congressional Budget Office says would probably cause a recession if left unchanged.
On July 25, the Senate voted 51-48 to pass a plan supported by Obama that would let the tax cuts for top earners expire. The House rejected that approach earlier today on a 170-257 vote.
In the House debate, lawmakers reprised familiar themes about the potential effects of higher taxes.
Republicans said the Democratic proposal would hurt the economy with a disproportionate effect on business owners who pay taxes on their profits through their individual returns.
“The choice is clear: you either want growth or you want more taxes,” said Representative Eric Cantor of Virginia, the House majority leader. “You either want to endow the folks who earn the money with the right to keep that money and grow this economy, or you want to tax those people more and let Washington decide how it’s going to allocate that money.”
Democrats said high-income households can afford to pay more to help reduce the federal budget deficit. Over a decade, the Democrats’ plan would generate at least $900 billion more money for the government.
Most of the Republican plan’s benefits would go to millionaires, including rock stars and business executives, said Representative Steve Cohen, a Tennessee Democrat.
“They can afford to pay it,” Cohen said. “They’re not spending their money. We need Americans who spend their money to stimulate the economy.”
The Democrats backing the Republican plan included Larry Kissell of North Carolina, Bill Owens of New York, Gerry Connolly of Virginia and Jim Costa of California. The lone Republican to vote against his party’s plan was Timothy Johnson of Illinois.
Democrats tried to draw attention to the Republicans’ decision not to extend refundable tax credits created in the 2009 economic stimulus law that benefit college students and low-income families. That may include some low-income military families, Democrats said.
‘At All Costs’
“This debate is not about tax reform,” said Representative Sander Levin of Michigan, the top Democrat on the Ways and Means Committee. “It’s about whether or not we protect the very wealthy at all costs.”
Republicans said Congress needs to keep the estate tax from increasing. The Senate bill wouldn’t address the estate tax, a decision Democrats in that chamber made because of divisions within their party. If Congress doesn’t act, the per-person tax exemption for estates would drop to $1 million in 2013 from this year’s $5.12 million, and the top rate would increase to 55 percent from 35 percent.
The House will vote tomorrow on a separate Republican proposal to establish a fast-track process for considering a tax-code overhaul in 2013. The measure sets out parameters for an overhaul, which would cut the top corporate and individual tax rates to 25 percent from 35 percent, combine the six-bracket system into two and curtail or eliminate tax breaks.
“We do not need the politics of envy and divisiveness,” said Representative Blake Farenthold, a Texas Republican. “We need tax reform and this puts us on the path to do it.”
The Republican bill is H.R. 8. The Democratic alternative is H.R. 15. The Republican tax overhaul process bill is H.R. 6169. The Senate-passed bill is S. 3412.
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