Tax-cut and stimulus package hits snag in House

Reporting from Washington and Los Angeles —  The House on Thursday found itself temporarily stymied on how to proceed on the tax-cut extension package when some Democrats protested the terms of debate on the package negotiated by President Obama and Republicans.

The House on Thursday found itself temporarily stymied on how to proceed on the tax-cut extension package when some Democrats protested the terms of debate on the package negotiated by President Obama and Republicans.

Originally, Democratic leaders had hoped to have a vote on the measure Thursday afternoon, but they were forced to pull back a rule needed to bring the measure to the floor when liberals objected to terms of debating such issues as the estate tax.

Leaders were hopeful they could resolve the dispute in time to vote later Thursday, but a final vote could spill into Friday.

The $858-billion, temporary package extends the Bush-era tax cuts to all including the wealthy, adds 13 months of unemployment benefits and would cut payroll taxes for a year. It passed the Senate 81-19 on Wednesday.

President Obama has called on the House to pass a bill with the same provisions so that it can quickly go to the White House to be signed. But House liberals, upset with Obama and with being cut out of the negotiating process, have forced a vote on a different version of the estate tax.

The estate tax was allowed to expire for 2010, but without action would go to a top tax rate of 55% after Jan. 1. The version passed by the Senate and supported by Obama calls for the first $5 million of an estate to be inherited tax-free and the rest subject to a 35% rate. The dividing line rises to $10 million of a couple’s estate.

The amendment being pushed by liberal Democrats would set the value of the estate to pass tax-free at $3.5 million, or $7 million for couples. The rate thereafter would be 45%.

Thursday morning, the House began debate on the rule for the package, a needed step to bring the package up for a final vote sometime in the afternoon or evening. Republicans and Democrats made the arguments that are familiar from the ongoing debate in recent weeks.

“I don’t like this bill, but I like even less the notion of raising taxes on average Americans,” said Rep. David Dreier (R-San Dimas).

In addition to the estate tax, Democrats continue to be unhappy that the tax cuts for families earning more than $250,000 a year will also be extended along with the middle-class cuts.

Republicans are unhappy with the overall cost, the need to borrow funds to pay for new spending including the jobless benefits and the payroll tax reduction, all factors that will increase the deficit.

Rep. Tom McClintock (R-Granite Bay) said he will support the package, which he said is 85% tax relief and 15% spending on items such as jobless benefits.

“Some of my fellow conservatives object to spending 15% of money we don’t have and I agree. That damage can be corrected through offsetting spending reductions next year,” he said.

Rep. Peter A. DeFazio (D-Ore.) condemned the payroll tax reduction, which he called an absurdity and a threat to the Social Security program as a whole. The tax will drop to 4.2% from 6.2% for a year, a savings of about $1,000 for someone earning $50,000 a year. The cut was designed to get more money into peoples’ paychecks to stimulate spending.

The House also beat back an effort to adjourn the proceedings, 385-14. The adjournment move was sponsored by Rep. Gene Taylor (D-Miss.), who argued that there was not enough time was set aside for opponents of the package to speak. Taylor said he opposes the bill’s impact on increasing the federal deficit.

michael.muskal@latimes.com

lisa.mascaro@latimes.com