House Tax Cut Vote Delayed as Dems Regroup

Update: 2:07PM ET

Despite expectations that the House will pass President Obama's tax compromise legislation later today, House leadership has run into trouble clearing the measure for a vote, CBS News Radio Correspondent Bob Fuss reports, facing open revolt by many Democrats and a small but growing band of Republican opponents.

A Democratic leadership aide tells CBS News that party leaders were concerned they lacked the support to pass the bill because of the way they structured the vote. Consequently, they pulled it from the House floor.

A number of House Democrats were unhappy with the vote sequence, CBS News Capitol Hill Producer Jill Jackson reports, because they wanted a chance to vote both for a change in the estate tax provision and against the Senate bill.

However, the vote was structured in such a way that if Congress approved a change in the estate tax provision, the Senate bill would have been altered and automatically sent back to the Senate. If that bill failed, the House would get a straight up or down vote on the Senate bill, in which case they could not vote for the estate tax provision.

Currently, the tax package would enact a 35 percent tax on estates worth more than $5 million. House Democrats want to change the tax rate to 45 percent and only exempt estates up to $3.5 million.

Now, Democrats will regroup and attempt to restructure the rule in such a way that allows opponents of the tax cut bill to have a clear vote against it, Jackson says.

Democrats say that despite the delay, the vote will likely still come to the floor today.

The Senate on Wednesday overwhelmingly passed the major package of tax breaks, one that adds $858 billion to the U.S. debt. Obama has urged balky Democrats in the House of Representatives to fall in line and pass the bill without changes.

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Obama's willingness to compromise on tax issues he found distasteful reflected a change of tactics forced on him after Republicans scored landslide victories in congressional elections last month. The opposition gained a majority in the House and significantly diminished the Democratic majority in the Senate.

After the Senate vote Wednesday, Obama declared himself still opposed to portions of the legislation because it keeps in place big tax benefits for the wealthy. Nevertheless, he said, compromise was necessary.

"I know that not every member of Congress likes every piece of this bill, and it includes some provisions that I oppose. But as a whole, this package will grow our economy, create jobs, and help middle class families across the country," Obama said in a statement.

In return for keeping in place tax cuts for all income levels, Obama had won a Republican pledge to vote for a 13-month extension of jobless benefits for the long-term unemployed. The deal also includes a 2 percent reduction in payroll taxes that fund Social Security, the federal pension system for the retired and disabled.

Most Democrats, along with Obama, opposed keeping tax cuts in place for households earning more than $250,000 a year. But Republicans threatened to scuttle a continuation of tax breaks for those who earn less than that amount without continued breaks for the wealthy.

The part of the Senate-passed legislation liberal House Democrats find most upsetting involves inheritance taxes. At the insistence of Republicans, the first $10 million of a couple's estate could pass to heirs without taxation. The balance would be subject to a 35 percent tax rate.

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The estate tax was repealed for 2010. Under current law, it is scheduled to return next year with a top rate of 55 percent on the portion of estates above $1 million, or $2 million for couples.

House Democrats passed a bill a year ago that would exempt estates only up to $3.5 million and taxing them after that at 45 percent, and they are fighting to insert that language into this bill.

Maryland Rep. Chris Van Hollen is leading the effort to change the Senate provision, reports CBS News Capitol Hill Producer Jill Jackson. Van Hollen, who called the bill's existing language "egregious," argued that the current provision would not help create jobs, and would add "15 billion dollars to the deficit and benefits just 6,600 families a year." Rep. Earl Pomeroy (D-N.D.), who offered the amendment, says he think it will get a vote.

Despite House Democrats' displeasure with the law, it was widely expected to pass because few lawmakers in either party are keen to have cast a vote that could significantly raise taxes on the middle class.

But passions still were running high in the House, where debate will be heated. Attempts to alter the Senate bill were widely expected.

"Let's find out if Republicans really want to jeopardize income tax, payroll tax and estate tax relief for every American in order to provide a budget-busting bonanza to the country's richest estates," Rep. Chris Van Hollen, a leader within the Democratic Party, wrote in a Washington Post opinion piece on Wednesday. "House Democrats think this trade-off should be debated and voted on in the light of day."

Even so, said Democratic Rep. Bill Pascrell Jr., "We can jump up and down all we want about the higher-end estate taxes, and I don't think anything's going to change because the Senate isn't going to change it."

Thirty-one members of the conservative Blue Dog Democrats sent a letter to House Speaker Nancy Pelosi urging quick passage of the bill.

"It is time for us to put aside the partisan talking points and accomplish what the American people sent us here to do," said the letter.

Shortly after passage of the tax bill, the Senate plunged into debate on the New Start nuclear arms agreement between the United States and Russia. Democrats were pushing to give Obama a foreign policy victory before Republicans take more power next year.

Democrats easily cleared an initial hurdle on the landmark treaty that would lower the cap on nuclear warheads for both countries and establish a system for monitoring and verification. They prevailed, 66-32, to move forward on the pact, winning the backing of nine Republicans.

According to a report by the Hill, one Democrat is claiming that Mr. Obama is urging Democrats to vote for the legislation by arguing that seeing it fail could mean the "end of his presidency."

"The White House is putting on tremendous pressure, making phone calls, the president is making phone calls saying this is the end of his presidency if he doesn't get this bad deal," Democratic Rep. Peter DeFazio, of Oregon, told CNN's Eliot Spitzer in a recent interview.

White House spokesman Tommy Vietor denied the claim on Wednesday, firing back that "The president hasn't said anything remotely like that and has never spoken with Mr. DeFazio about the issue."

The U.S. Constitution requires that treaties be ratified by two-thirds of the Senate, or 67 senators. Republicans were threatening to put off consideration of the treaty until the new Congress is seated early next year.

Obama's compromise on taxes apparently broke that logjam and the treaty was quickly brought to the floor.