House Democratic caucus angrily objects to tax-cut package

Angry House Democrats on Thursday voted to reject the tax-cut extension package negotiated by President Obama with Republicans.

In an emotional voice vote in their caucus, Democrats, who have repeatedly attacked the agreement as too generous to the rich, said the package should not come to the floor in its current form. The next step is up to the leadership.

“In the caucus Thursday, House Democrats supported a resolution to reject the Senate Republican tax provisions as currently written,” Speaker Nancy Pelosi said in a statement. “We will continue discussions with the president and our Democratic and Republican colleagues in the days ahead to improve the proposal before it comes to the House floor for a vote.”

The move is a sharp rebuke to Obama, who hours earlier had stepped up his campaign to sell his tax-cut-extension agreement, arguing that the nation’s economy could be severely damaged and the recovery might begin to move backwards if Congress fails to pass the package.

In an e-mail statement, the White House said it remained confident of final passage.

“The House and Senate are working through the normal process of bringing a bill forward, and we are confident that the major components of the tax framework that we fought for will remain in the final package brought to the floor and ultimately passed by Congress.”

Democrats have been more vocal in their growing unhappiness ever since Obama earlier this week announced the agreement negotiated by the White House and Republicans.

The package includes a temporary extension of the Bush-era tax cuts to all Americans, combined with an extension of unemployment benefits for 13 months and a payroll-tax reduction. Without congressional action, all the tax cuts expire at the end of the month.

House Democrats have said they are angry they were shut out of the bargaining process and with some of the provisions, especially the changes in the estate tax, which they consider to be too generous.

Also rankling some House Democrats was that Obama had capitulated to Republicans by agreeing to extend the tax cuts to the rich, rather than just for the middle class. Democrats, including Obama, have long opposed the tax cuts for the rich.

But at a news conference this week, Obama defended his compromise, arguing that the symbolism of fighting was not as important as a victory in keeping the tax cuts for the middle class.

That frustration with Obama’s actions boiled over Thursday in the caucus.

Some Democrats in the room started chanting “Just say no,’’ during the meeting, according to Rep. Brad Sherman (D-Calif.)

“I think that this caucus is grudgingly willing to extend for two years the Bush tax cuts even for the upper income if that’s the only real part of the deal,’’ Sherman said. “If that was the only thing, you wouldn’t have this attitude.”

Rep. Shelley Berkley (D-Nev.) said the resolution “means nothing” but was a way “to get on record to say how disgruntled and unhappy we are ... there is tremendous unhappiness in the caucus, there’s no doubt about that.’’ She said she is prepared to vote for the deal.

“A lot of people are angry,” agreed Rep. Loretta Sanchez (D-Calif.): “There’s a lot of anger in there.”

The estate tax provision was an “overkill for most Democrats,” she said.

The estate tax provision would make the first $5 million tax-free for each spouse for a total of $10 million. After that there would be a 35% tax.

Liberals want both numbers to be less generous to the rich. Conservative Republicans, particularly in the Senate, want the estate tax to stay at zero.

“We have taken a position that this is not an acceptable package,” said Rep. Peter DeFazio (D-Ore.), who sponsored the resolution in the caucus. “It’s way too expensive, to benefit very few. We want something that is targeted to the people most in need. ... We want a better deal for the American people and the taxpayers.

Rep. Xavier Becerra (D-Los Angeles), vice chairman of the Democratic Caucus, called the agreement “a handsome ransom” that was tilted to the Republicans and the rich.

“What the Republicans extracted on behalf of the 2% percent of Americans, I think is a heavy price,” he said. “The president felt he had to pay it. Many of us don’t believe you should negotiate with hostage-takers that way and that we can preserve this for the middle class without having to go to that extreme.’’

Some Democrats like Berkley said the package was not perfect, but sometimes the good had to suffice, an echo of the administration’s mantra during the healthcare overhaul fight. “We all have issues with this compromise. ... Perfect no, good yes. ... If this is the package the Senate is going to vote on, if they pass it, it’s coming to us with no amendments. I didn’t want to have a resolution from the caucus saying we’re opposed to it.”

Republicans, who will take control of the House in January, were sanguine about the Democrats’ actions and noted Democrats would have to get used to their new, less-lofty status.

“I think that they’re having trouble adjusting to the new reality, and that is the president saw the tea leaves. His name is on the ballot next time,” said Rep. Jack Kingston (R-Ga.). “I understand that there are hardliners but they need to get used to being triangulated. It’s nothing new in this town to either party. I don’t think Republicans are exactly jumping for joy. They think we’re in some back room giving each other high-fives, but there are a lot of people who haven’t made up their mind to support it.’’

Said Rep. Kevin McCarthy (R-Calif.), the next majority whip: “Here’s a majority caucus that did not listen to the last election, that wants to raise taxes in a recession.”

Hours earlier, the president warned that the negotiated agreement was crucial, saying he urged “members of Congress to move forward on this essential priority.”

Passage will determine “in part whether the economy moves forward or backward,” Obama said at a White House meeting of his export council. “The bipartisan framework on the economy that we have forged on taxes will not only protect working Americans from seeing a major tax increase on January 1st, it will provide businesses incentives to invest, grow and hire.

“Every economist I have talked to or read in past days acknowledges that this agreement” will bring economic growth in coming years and has the potential to create millions of jobs, he said. “If this framework fails, Americans will see it in smaller paychecks.”

In a letter, 54 House Democrats said earlier that they opposed the agreement, a signal of the later unhappiness in the caucus.

Staff writers Lisa Mascaro and Michael Memoli contributed from Washington.

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