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House approves ‘fiscal cliff’ deal, rescinding broad tax hike

This post has been updated. See below for details.

WASHINGTON — The House gave final approval Tuesday night to a bill to rescind tax increases for the vast majority of Americans, but only after a day of closed-door debate among Republicans, who were forced to allow a vote on a compromise many in their party disdained.

The final tally, 257 to 167, included most of the chamber’s Democrats and fewer than half of the Republican majority.

The deal, largely negotiated by Vice President Joe Biden and Senate Republican Leader Mitch McConnell (R-Ky.), had passed the Senate early Tuesday morning. It blocked income tax hikes for roughly 99% of households, but allowed rates to rise for those with incomes above $400,000 for individuals and $450,000 for couples.

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It also renewed tax credits aimed at low-income households and college students, extended unemployment benefits, delayed automatic spending cuts in defense and other government programs for two months and resolved several other issues that Congress had left hanging.

The lopsided 89-8 vote in the Senate was engineered by McConnell and Senate Majority Leader Harry Reid (D-Nev.) to put as much pressure as possible on the House to follow suit. But as House Republicans gathered for the first of two private caucus meetings early on New Year’s afternoon, many vowed to resist.

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The mood did not last.

Early in the evening, Republicans held a second caucus meeting. This time, take-out Chinese food replaced sandwiches, and resignation subbed for defiance.

Several Republicans said afterward they feared that, if the bill failed and taxes went up, their party would take the blame.

“You do have to know when to hold ’em and when to fold ’em,” Rep. Steve LaTourette (R-Ohio), an ally of Speaker John A. Boehner, said as he emerged from the meeting. “We’ve been beaten [in] this fight.”

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Even so, the decision by Boehner (R-Ohio) to bring the bill to a vote rankled many Republicans. The compromise, they complained, did virtually nothing to cut spending. And while it kept the low George W. Bush-era tax rates for most Americans, the tax hikes it did contain were anathema to lawmakers who had sworn to oppose any increase. Indeed, passage of the bill in the Senate marked the first time in two decades that any Republican in Congress had voted for an income tax increase.

Some Republicans balked at the economic stimulus provisions in the bill — primarily the low-income tax breaks, which were a priority for President Obama and House Democrats. They also objected that the bill would raise far more in tax revenues than it would trim in federal spending, which they worried set a bad precedent for future budget negotiations with the president.

In the first caucus meeting, Rep. Eric Cantor of Virginia, the No. 2 Republican in the chamber, told members he could not support the bill. Others pushed for a vote on an amendment to add spending cuts.

For a time, Republican lawmakers said they were fired up to fight the Senate bill — many recalling with nostalgia Boehner’s Plan B, which would have taxed incomes only above $1 million, roughly the top two-tenths of 1% of Americans. That bill never came to a vote, however, because the speaker was forced to yank it from the floor last month amid GOP resistance.

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As discussions continued into the evening, however, Republicans increasingly began to accept that they had little choice. Senate leaders had made clear they would not consider any changes to the bill — and a head count of GOP members indicated that even if an amendment were added to cut spending, a majority of the caucus would still oppose it.

Lawmakers also warily eyed the clock ticking toward morning, when the financial markets would begin reacting if the picture in Washington remained unsettled. Economists have warned for months that the combination of across-the-board tax increases and spending cuts would raise unemployment and potentially bring on a new recession.

Rep. Jack Kingston (R-Ga.), a veteran congressman, said, “I think we’re at the time where people are tired.”

“The timing is, people are ready to vote,” he said. “The Senate sat on their duffs all year, and they had a great 48-hour push, but for the House this really has been a long one-year process. We’ve gone as far as we can go, and I think people are ready to bring it to conclusion.”

“We have dealt with this issue long enough,” said Rep. Bill Young (R-Fla.). “Both sides have given; both sides have gotten.”

As Republican members of Congress debated what to do, influential outside groups sent mixed signals. Grover Norquist, author of the pledge against tax increases that most Republican members of Congress have signed, recommended that the GOP vote for the bill, while the Heritage Foundation and various tea party groups that have substantial influence over GOP conservatives called for the party to oppose it.

Former House Speaker Newt Gingrich took the opportunity to chide his one-time colleagues. “The GOP has been engaged in a two month dance of defeat and surrender!” he said in a Twitter message. “I hope tonight is the end of this self defeating strategy.”

The official cost estimate by the Congressional Budget Office also added to the misery Republicans felt. The tax increases and spending cuts in the fiscal cliff would have sharply reduced the deficit — too sharply in the eyes of most economists. By comparison with those measures, the Senate-passed legislation would make the deficit worse by nearly $330 billion for the 2013 fiscal year, and just shy of $4 trillion over the course of the next decade.

The main elements that added to the deficit were the decisions to keep taxes low on 99% of American households and to make a permanent adjustment to the Alternative Minimum Tax to keep it from affecting millions of additional middle-class taxpayers. Even so, many members said they objected to voting on a measure that even technically made the deficit worse.

Democrats looked on in bemusement at the disarray across the aisle. Biden held a closed-door session with Democrats. He called for party members to support the Senate bill despite concerns expressed by liberals, inside Congress and out, that it set too high a threshold for tax increases.

House Minority Leader Nancy Pelosi (D-San Francisco) categorized the compromise measure as “gigantic progress.” Throughout the day, she and other Democratic leaders repeated calls for Boehner to give the Senate bill an up-or-down vote.

The president monitored the action from the White House. Obama has no events on his schedule for the rest of the week, opening the way for him to return to Hawaii to rejoin his family on vacation. He could sign the bill into law while there.

[Updated at 8:05 p.m.: This post has been updated to reflect the final vote in the House.]

lisa.mascaro@latimes.com

kathleen.hennessey@latimes.com

Michael A. Memoli in the Washington bureau contributed to this report.



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