Despite intense White House lobbying, House Democrats - who still control the chamber through the end of the year - voted Thursday morning not to take up the tax cuts "framework" worked out by President Obama and top Republicans.
"This bill in its current form will not be voted on," Brendan Daly, spokesman for speaker Nancy Pelosi, told CBS News following the closed-door vote.
A House leadership aide tells CBS News that the voice vote shows just how upset Democrats are about the agreement. They object to its two-year extension of the Bush tax cuts for all Americans, including the highest earners, as well as relatively high threshold and low tax rate for the estate tax.
"The House was not consulted during the negotiations that produced this package, and our support cannot be taken for granted now or in the future," Rep. Raul M. Grijalva, co-chair of the Congressional Progressive Caucus, said in a statement following the vote.
The vote, which is nonbinding, increases pressure on Senate Democrats to make changes to the $900 billion agreement to make it more palatable to their counterparts in the House.
"The president's tax deal is suddenly in big trouble," CBS News Capitol Hill correspondent Bob Fuss said following the vote. The strong opposition from rank-and-file House Democrats puts Pelosi in a bind, he added, because "even if the deal could pass with mostly Republican votes, her members are saying, 'don't let it.'"
Responding to the news, White House Deputy Communications Director Jen Psaki said in an email, "The House and Senate are working through the normal process of bringing a bill forward and we are confident that the major components of the tax framework that we fought for will remain in the final package brought to the floor and ultimately passed by Congress."
President Obama's has argued that rejecting the deal means an unacceptable risk that middle- and lower-income Americans will be harmed without the continuation of unemployment benefits, an extension of their tax cuts and other tax breaks.
But Rep. Peter Defazio said following the vote Thursday morning that he believes Republicans are bluffing by suggesting they will not compromise further.
"I think the Republicans were blowing smoke if they say that they were not going to extend the unemployment benefits and they were going to go home for Christmas not having done that," he said.
Defazio said the House Democratic Caucus vote to reject the current deal was "virtually unanimous" and that it would force Republicans and the president to renegotiate. Chants of "just say no" could be heard outside the meeting room as the issue was being discussed.
Not every Democrat agreed with Defazio, however.
"I am extremely displeased that the Democratic Leadership has chosen to ignore the will of the American people and not bring the tax proposal up for a vote," Rep. Dan Boren said in a statement following the vote. "A clear majority of the U.S. House of Representatives supports this plan. We are allowing the liberal wing of the Democratic Caucus to hold these critically needed tax cuts hostage." Rep. Shelley Berkley of Nevada also said she did not agree with her colleagues' opposition to bringing the bill to the floor.
It looked last night like the bill had enough support for passage thanks to the backing of most Republicans and a handful of Democrats. But strong opposition from Democrats in the House - which voted last weekend to extend the Bush tax cuts only for couples making below $250,000 or individuals making less than $200,000, only to see the bill blocked in the Senate - is threatening to torpedo the agreement.
"We will continue discussions with the President and our Democratic and Republican colleagues in the days ahead to improve the proposal before it comes to the House floor for a vote," Pelosi said in a statement.
The leadership aide told CBS News that the voice vote shows that the House will not simply sit quietly and accept the bill, and cast it as an enormous problem. In addition to the extension of the tax cuts for high earners, many House Democrats strongly object to the agreement's provision exempting the first $5 million of an estate from the estate tax and taxing the rest at 35 percent, not 45 percent.
Many also object to the fact that the bill will add to the deficit in part by giving a $120 billion tax break to the highest-earning Americans.
"We were told yesterday by the vice president this was a take it or leave it deal, we're saying leave it," Rep. Lloyd Doggett said following the vote. (This sentence has been corrected to attribute the comment to Doggett, not Rep. Chris van Hollen.)
Rep. Anthony Weiner
"If there are ways to strengthen the framework that are agreeable to everybody and strengthen the coalition, that's good," White House press secretary Robert Gibbs said Thursday afternoon. He added, however, that the deal was a result of both sides giving some ground. "If everybody took out what they didn't like," he said, "we would have nothing."
President Obama urged members of Congress "to move forward on this essential priority" before the vote Thursday morning, saying the deal both keeps average Americans from seeing a tax increase and gives businesses incentives to grow and hire. The outcome of the debate over the agreement, he argued, will decide whether America moves forward or backward.
On Wednesday, Larry Summers, Mr. Obama's chief economic adviser,would "materially increase the risk the economy would stall out and we would have a double-dip" recession.
Gibbs predicted at his daily briefing Thursday that a bill will get passed.
"I think at the end of the day, members are not going to want to be in their districts, senators are not going to want to be in their districts, when their constituents find out on the 1st of January that their taxes have gone up by several thousand dollars," he said.
Brian Montopoli is senior political reporter for CBSNews.com. You can read more of his posts here. Follow Hotsheet on Facebook and Twitter.