Obama Tax Cuts Move Forward In Congress

Economic stimulus legislation at the heart of President Barack Obama's recovery plan advanced in Congress Thursday over the persistent opposition of Republicans seeking deeper tax cuts than the administration and its Democratic allies favor.

"We are very pleased with the progress," said Speaker Nancy Pelosi, D-Calif., after $275 billion in tax cuts cleared the House Ways and Means Committee on a party-line vote of 24-13. Democratic leaders have promised the measure will be ready for Obama's signature by mid-February.

"It will create jobs immediately, and it will also lay the foundation for economic stability as we go forward," Pelosi added.

But Republicans said there was no reliable estimate of the bill's impact on employment.

"The American people deserve to know what they are getting for their nearly $1 trillion," said Rep. Dave Camp of Michigan, the top Republican on the tax-writing committee.

Congressional supporters estimate the current cost of the overall measure at $825 billion, including the $275 billion in tax cuts and $550 billion in spending on areas such as health care, education, energy, highway projects and more. The total is expected to grow as the legislation makes its way toward passage.

On the key vote of the day, Democrats closed ranks to preserve a tax break for this year and 2010 that would mean $500 for many workers and $1,000 for millions of couples, including those whose earnings are so low that they pay no federal income tax.

They also turned back a Republican attempt to jettison a new federal subsidy to help laid-off workers pay for health insurance after they lose employer-paid coverage, and a third to waive income taxes on unemployment benefits for two years.

Democrats argued that the Republican proposals would favor upper-income individuals and couples who they said benefited disproportionately from tax cuts passed during the administration of former President George W. Bush.

"We need to be dealing with people at the bottom of the income scale," said Rep. Jim McDermott, D-Wash. He also noted that the legislation would provide a $25-per-week increase in unemployment benefits.

But Republican Camp cited a report by the nonpartisan Congressional Research Service that he said showed lower and middle-income workers already would have received most of the benefits from the proposal to eliminate the tax on unemployment benefits.

Democrats have an oversized majority on the committee, as they do on all panels as a result of their gains in last fall's elections. And while Republicans sought several changes in the legislation, the proceedings were devoid of drama or even emotion.

Republicans in both houses have been developing alternatives to the Democratic legislation, and Rep. John Boehner of Ohio, the GOP House leader, announced a meeting next week with Obama.

"Our plan offers fast-acting tax relief, not slow-moving and wasteful government spending," he said, referring to a study by the Congressional Budget Office that questioned administration claims that the money could be spent fast enough to reduce joblessness quickly.

Not all Democrats were completely pleased with the legislation making its way to a vote on the House floor next week.

The portion of the measure ticketed for highway and bridge construction, $30 billion, is far less than some favor, and there was grumbling.

"This bill ... is not even near what we need for short-term needs and it does not in any meaningful way address the long-term needs for our country," said Rep. Peter DeFazio, although he added, "It is better than nothing."

There was outright opposition in the House to another element of Obama's economic recovery program, but it was entirely symbolic.

On a vote of 270-155, lawmakers voted to block use of the remaining $350 billion in the financial industry bailout created last fall. Among the opponents were 90 Democrats.

The Senate cleared the way for Obama to use the money last week, so the House vote was little more than a chance for individual lawmakers to vent their opposition. Some Democrats took advantage of the opportunity. "There's a massive transfer of wealth going on, taking money out of the pockets of the American people and putting it into these banks. This has to stop. we have to stop," said Rep. Dennis Kucinich, D-Ohio.

The tax cuts that won committee approval included a $500 credit for workers making up to $75,000 per year. Couples with incomes up to $150,000 a year would receive a $1,000 credit. Individuals with incomes up to $100,000 and couples earning up to $200,000 would qualify for lesser tax breaks.

The Republican alternative envisioned a different approach.

It called for reducing the current 10 percent bracket to 5 percent, affecting a taxpayer's first $8,350 in income, and lowering the existing 15 percent bracket to 10 percent, covering income from $8,351 to $33,950.

The legislation that cleared committee also would provide a temporary $2,500 tax credit to help pay for college, and includes breaks to encourage the production of renewable energy resources.

For businesses, the measure includes $29 billion in tax cuts to encourage investment in new plants and equipment, and to permit money-losing firms to claim refunds on taxes paid up to five years ago, during profitable times.