Tax cuts will pass despite Democratic uprising, Obama advisor says

The $858-billion package of tax cuts and jobless benefits that President Obama and Republican leaders crafted will pass Congress without major changes despite a revolt among House Democrats, a top administration advisor said Sunday.

“At the end of the day, no one wants to see taxes go up on 150 million Americans on Jan. 1,” senior White House advisor David Axelrod said.

Some provisions are “odious,” Axelrod said, singling out upper-income tax cuts and the estate tax. But that’s the nature of compromise, he said, calling the overall deal a “win for the American people.”

He spoke on CNN’s “State of the Union” and ABC’s “This Week.”

A showdown in the lame-duck Congress is coming this week, with the Senate resuming consideration Monday.

The package would extend George W. Bush-era tax cuts for two years across the board, not just on incomes below $250,000 for families and $200,000 for individuals, as Obama and many Democrats had wanted. Without action, the tax cuts expire at the end of the month.

The Obama- GOP deal also would revive the estate tax, which lapsed at the end of 2009, but at a lower rate than many Democrats prefer. In addition, jobless benefits would be extended and the payroll tax would be reduced by 2 percentage points for one year.

Rep. Chris Van Hollen (D-Md.), who will be the top Democrat on the House Budget Committee next year, told “ Fox News Sunday” that the estate tax provisions remained a “choking point.” The bill would allow individuals to pass on to heirs up to $5 million tax-free, and couples up to $10 million. Higher amounts would be taxed at a top rate of 35%.

Van Hollen, among others, favors less generous estate tax terms and suggested the provision should be voted on separately. But he said the estate tax was not a deal breaker.

Some Democrats favor a 45% tax rate on estates worth more than $3.5 million.

Rep. Paul D. Ryan (R-Wis.), who is poised to become chairman of the House Budget Committee in the next Congress, said if House Democrats scuttled the deal, the first thing Republicans would do next year was prevent “job-killing tax increases” and make the changes retroactive. Come January, the GOP will hold a majority in the House and more seats in the Senate.

Senate Majority Whip Richard J. Durbin (D-Ill.) called the package “the only stimulus we can bring to this economy. We need to work together to pass it, and hope that this economy gets well.”

“In three weeks, Republicans take over the House of Representatives,” Durbin said on “State of the Union.” “We have to accept the reality.”

Economist Austan Goolsbee, chairman of the White House Council of Economic Advisors, also predicted the deal would be approved.

Goolsbee said on NBC’s “Meet the Press,” however, that Obama did not believe tax cuts for high-income Americans would stimulate the economy. But he called them part of a compromise needed to win provisions beneficial to the middle class. When high-income tax cuts lapse in two years, he said, they will not be able to “stand on their own merits.”

He sidestepped a question on when the country would see a meaningful reduction in the unemployment rate. He said the rate was influenced by the number of jobs created and the number of people entering the labor force.

“Having private-sector job growth for 11 months and adding 1.2 million jobs is a good start,” Goolsbee said, “but we’ve got to do much more.”

kskiba@tribune.com