Tax Debate

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Senate set to debate tax plan compromise

Posted: December 13th, 2010 -- 11:18 AM ET

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CNN Wire Staff


Washington (CNN) -- Senators are expected to open debate on the tax compromise reached by President Barack Obama and Republicans Monday, but House Democrats will likely try to change the deal, one of their leaders said.

Rep. Chris Van Hollen of Maryland, who heads the Democratic Congressional Campaign Committee, told reporters that the package will get a vote in the House despite a threat by House Democrats last week to prevent it from reaching the floor.

"What form the bill comes to the floor in is something that's under discussion and debate," Van Hollen said, later adding that the House "will have an opportunity to work its will, but there will be, as I say, discussions as to the form it takes when it arrives for that vote."

The Senate will be the first to consider the tax package, which would extend tax cuts from the Bush era for another two years while also funding unemployment benefits for another 13 months and enacting a one-year payroll tax reduction intended to bolster a sluggish recovery from the economic downturn.

The estate tax -- currently scheduled to return in 2011 to a top rate of 55% along with a $1 million exemption -- would instead come back with a lower top rate of 35% along with a $5 million exemption under the deal.

The measure is expected to add $893 billion to the federal debt over the next five years, according to the non-partisan Congressional Budget Office.

On Thursday, Senate Majority Leader Harry Reid, D-Nevada, released the first version of legislation to implement the negotiated deal and said the first vote on it, a procedural one to open debate, would occur Monday.

On Sunday, White House senior adviser David Axelrod ruled out any major changes to the tax package, telling CNN's "State of the Union" that it was time to move forward on a compromise that includes elements distasteful to each side.

"I think the Senate is going to take this bill up tomorrow, and we believe that when it comes back to the House, that we will get a vote, and that we'll prevail there, because at the end of the day, no one wants to see taxes go up on 150 million Americans on January 1st," he said.

Van Hollen said the main concern of House Democrats is the estate tax provision, which more liberal members of Congress insist unfairly benefits the wealthy while doing little to aid the recovery.

Republican leaders argue a full return of the estate tax would, among other things, make it nearly impossible for many family-owned small businesses to be passed down from one generation to the next.

Two other House Democrats, Rep. Jim McDermott of Washington and Rep. Elijah Cummings of Maryland, agreed on CNN's "State of the Union" that the House would take up the package, even though some Democrats would vote against it.

The remarks showed a softening in the sometimes vitriolic Democratic opposition so far to the tax and benefits package that Obama announced last week.

At a closed meeting Thursday where members shouted "just say no," House Democrats decided against even considering the deal, raising questions about Obama's influence in his own party and whether any agreement with Republicans could win congressional approval in the current lame-duck session.

The tax cuts are set to expire at the end of the year, which means Obama and Democrats face a fast-approaching deadline to reach a deal or see tax bills increase for everyone.

With Republicans winning control of the House and diminishing the Democratic majority in the Senate in the new Congress that convenes in January, Obama and his top aides argue that a deal must be cut and delivered now.

House Democrats initially opposed the package because it includes a two-year extension of lower Bush-era tax rates for everyone, including millionaires. They support the stance Obama has championed for years -- extending the current lower tax rates only for those earning up to $200,000 a year, or families earning $250,000, while letting rates for higher incomes return to 1990s levels.

However, Senate Republicans have refused to accept any difference in tax treatment for the wealthy, demanding that all current rates be extended. Last week, they blocked Democratic measures in the Senate to limit the extended tax cuts to income levels below $1 million a year.

At the same time, some conservatives are challenging the plan over the deficit hit.

Still, Sen. Dick Durbin of Illinois, the chamber's No. 2 Democratic leader, told CNN that Senate Minority Leader Mitch McConnell, R-Kentucky, had guaranteed that his caucus would permit the bill to come before the chamber.

"We will need Republican support to pass it" because of opposition by some Democrats, Durbin noted, adding that McConnell "has promised" the support would be there.

CNN's Tom Cohen contributed to this report.