House approves Obama’s tax-cut deal

The House approved President Obama’s sweeping tax-cut compromise at midnight Thursday, preventing tax rates from rising Jan. 1 and sending the president a bipartisan agreement that few could have imagined in deeply polarized Washington.

The vote to accept the $858-billion Senate-passed measure was 277 to 148. Now it goes to the president for his signature, which is expected to be swift. Obama campaigned incessantly for passage despite his opposition to extending the George W. Bush-era lower tax rates across the board, including on family income above $250,000.

Shortly after the bill passed, Treasury Secretary Timothy F. Geithner issued a statement calling it “good for growth, good for jobs, good for working and middle-class families, and good for businesses looking to invest and expand their workforce.”

House passage of the Senate bill cleared the way for further action this weekend. Senate Majority Leader Harry Reid (D-Nev.) called for votes Saturday to advance a youth immigration bill known as the Dream Act and a repeal of the “don’t ask, don’t tell” policy against gays serving openly in the military.

All day Thursday, House members struggled to reach final passage and overcome a persistent protest from liberal lawmakers incensed over the tax deal’s benefits for the nation’s wealthiest earners.

Democratic leaders worked to allow liberal opponents a way to register their objection, but wanted to avoid any change that would send the bill back to the Senate with so little time remaining in the lame-duck Congress.

Liberal House Democrats were particularly opposed to a $68-billion provision that would reinstate the estate tax at a 35% rate on estates above $5 million for singles and $10 million for families.

Democrats pushed until late Thursday for a 45% rate, with exemptions on estates below $3.5 million for singles and $7 million for families — the rate that was in place until the tax lapsed at the end of 2009.

In the end, House leaders agreed to permit a vote on just one amendment – on the estate tax. It failed, 233 to 194, with most Republicans and several dozen Democrats voting no.

The House then approved the Senate bill, with nearly equal numbers of Democrats and Republicans supporting it.

But the debate that preceded the votes was bitter.

Rep. Linda T. Sanchez (D-Lakewood) called the package “reckless.”

Rep. Jay Inslee (D-Wash.) decried its “deja-voodoo economics.”

Rep. Eric Cantor (R-Va.) urged colleagues to “put politics aside” to ensure that tax breaks set to expire Dec. 31 would continue.

The package contains a two-year extension of income tax cuts approved during the Bush administration, including for earnings above $250,000 for families and $200,000 for individuals, along with direct aid to jobless workers and stimulus measures that Republicans largely oppose.

Dividends and capital gains would continue to receive Bush-era tax breaks. Middle-income Americans would see a one-year cut in payroll taxes, from 6.2% to 4.2%, that would place up to $2,000 in workers’ pockets.

Democrats were in the uncomfortable position of approving tax cuts they had long opposed on grounds that breaks for the wealthy drive up the national debt.

“I beg this body to defeat this bill,” Rep. Gene Taylor (D-Miss.) said during debate, drawing applause on the House floor.

Republicans wrestled with the political reality that the package contains the type of stimulus measures they opposed during the midterm election campaign.

Despite grass-roots opposition to government spending, Republicans in the tax deal have agreed to renewable energy grants and $56 billion in extended unemployment benefits through 2011 for as many as 7 million jobless Americans.

“I don’t like this bill,” said Rep. David Dreier (R-San Dimas). “I don’t know of anyone who stood up and said they like this bill.”

Moreover, the cost of the package is neither covered nor offset anywhere in the federal budget, adding to the national debt at a time when a bipartisan fiscal commission has just released a stark report on the need to rein in deficit spending.

Earlier in the evening, Reid withdrew a trillion-dollar spending bill that had been intended to avert a government shutdown this weekend.

It became bogged down over earmarks, with Republicans pledging to consume the rest of the Senate session debating the bill.

Instead, Reid said he would work with the GOP to offer a short-term spending bill that would fund the government into next year.

Republicans called the large spending bill bloated, even though many of the earmarks had been requested by GOP senators.

lisamascaro@latimes.com

Staff writer Kathleen Hennessey in Washington contributed to this report.