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Obama calls for lawmakers to back tax deal

Posted: December 15th, 2010 -- 11:24 AM ET

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Anderson Cooper reports


CNN Wire Staff

Washington (CNN) -- President Barack Obama urged lawmakers Wednesday to approve the compromise tax package he negotiated with Republican leaders.

Saying he is convinced that the legislation will spark growth, Obama acknowledged differences on "both sides of the aisle" and said "that's the nature of compromise."

In remarks at the White House, Obama said the package "can't afford to fall victim" to a delay or a defeat.

"I am absolutely convinced that this tax cut plan, while not perfect, will help our economy and create jobs in the private sector," Obama said. "It will help lift up middle-class families who will no longer have to worry about a New Years' Day tax hike."

Senate Majority Leader Harry Reid, D-Nevada, has confirmed that the Senate's final vote on the controversial deal will take place Wednesday. Senators debated the package late into the night Tuesday.

The proposal received strong bipartisan support in clearing a key Senate procedural hurdle Monday, with an 83-15 vote to end debate.

But as senators cleared the way for the pivotal vote, House Democrats continued to argue about whether they will change the measure after an expected Senate approval.

The package includes a two-year extension of the Bush-era tax cuts set to expire December 31, and also would extend unemployment benefits for 13 months, cut the payroll tax by 2 percentage points for a year, lower a restored estate tax, and continue a series of other tax breaks.

The estate tax -- currently scheduled to exempt inheritances up to $1 million and tax amounts above that at a rate of 55% -- would be reduced under the tax package to a rate of 35 percent on amounts above a $5 million exemption.

Republican leaders argue that 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.

House and Senate liberals have repeatedly argued that a lower or nonexistent estate tax would merely benefit the wealthy while doing little to aid the economy. House Democrats want to change the estate tax to levels previously approved in a separate House bill that would exempt inheritances up to $3.5 million and tax amounts above that at a 45 percent rate.

House Majority Leader Steny Hoyer, D-Maryland, predicted Tuesday that the House will ultimately pass the bill, but might alter the estate tax provision. However, more than two dozen moderate House Democrats submitted a letter to the House Democratic leadership Tuesday calling for the tax package to be passed unchanged so it can go directly to Obama to be signed into law.

"This bipartisan compromise is by design a temporary measure and, with its passage, we must acknowledge that our work is not done," said the letter signed by 27 House Democrats as of Tuesday evening. "We must continue to work together in a bipartisan fashion -- with a sense of shared responsibility -- toward solutions that address our economic and fiscal challenges. It is time for us to put aside the partisan talking points and accomplish what the American people sent us here to do."

Republicans involved in the negotiations with the White House on the package warned that any changes by the House could derail the entire proposal, causing tax rates to increase in 2011.

"If the House Democratic leadership decides to make partisan changes, they will ensure that every American taxpayer will see a job-killing tax hike on January 1st," Senate Minority Leader Mitch McConnell, R-Kentucky, said in a statement Monday.

If the House eventually passes a bill that differs from the Senate version, the revised package would need to return to the Senate for another vote. The Senate, in turn, could send back the original bill without any changes to the estate tax provision for a second House vote. Such a scenario, analysts note, would give House liberals unhappy with the president's plan a chance to say they tried to change it.

In total, the tax and benefits package is expected to add $893 billion to the federal debt over the next five years, according to the nonpartisan Congressional Budget Office.

With the Bush tax cuts set to expire at the end of the year, Obama and Democrats face a fast-approaching deadline to reach a deal. Republicans won control of the House and reduced the Democratic majority in the Senate in the new Congress convening in January, which would give Democrats less leverage to negotiate after the current lame-duck session.

House liberals are not the only ones objecting to the agreement. A number of conservatives -- including likely 2012 GOP presidential candidate Mitt Romney -- are challenging the deal because it doesn't permanently extend the Bush tax cuts and would add to the deficit.

CNN's Dana Bash, Tom Cohen, Alan Silverleib and Deirdre Walsh contributed to this report.