Tax Plan In Limbo After Democrats' Revolt

The House Democratic caucus has rejected the deal President Obama made with Senate Republicans to extend all the Bush-era tax cuts. That leaves the measure in limbo, along with all the things attached to it, such as the estate tax, an extension of unemployment benefits and a reduction in Social Security payroll taxes. So far, it's unclear what changes would satisfy House Democrats. If the lame-duck Congress doesn't act by Jan. 1, everyone's taxes go up.

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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

GUY RAZ, host:

And I'm Guy Raz.

And we begin this hour with a twist. The tax cut deal forged Monday between President Obama and Republican leaders had many Democrats simmering this week. Well, their anger boiled over today.

BLOCK: House Democrats approved a non-binding resolution this morning. It says the deal as it stands now will not be brought to the House floor for a vote.

And as NPR's David Welna reports, that could mean an across the board end to the Bush era tax cuts.

DAVID WELNA: House Democrats approved the resolution in a raucous-voiced vote behind closed doors. Its author, Lloyd Doggett of Texas, later read the one-sentence motion to reporters.

Representative LLOYD DOGGETT (Democrat, Texas): The Democratic caucus resolves that in its current form, the tax package should not come to the floor of the House for consideration.

WELNA: Doggett had said many Democrats spoke in favor of demanding changes in the tax cut package before it could be brought before the House. He said many also spoke of all 42 Senate Republicans signing a letter last week in which they vowed to block all legislation until the tax cuts are extended for everyone.

Rep. DOGGETT: We're doing much the same thing and saying, OK, time is late, the need is great, but we do not have to capitulate to just any deal that is offered.

WELNA: California's Loretta Sanchez said the intent was to give Democrats a role in shaping an agreement whose negotiation they did not take part in.

Representative LORETTA SANCHEZ (Democrat, California): We're going to take what we think is good in the deal and what we can live with in the deal. But we need some changes made to it and we'll make those changes to it, and that's probably what will move forward for a vote.

WELNA: The Democrats' chief complaint was the agreement struck on taxation levels for the estate tax. James Clyburn, the number three House Democrat, said the large amount of inheritance that would be tax free was simply unacceptable.

Representative JAMES CLYBURN (Democrat, South Carolina): Five million dollars a single, $10 million a couple is a bridge too far for me.

WELNA: As for the possibility that the Democrats' insistence on changes in agreement might jeopardize the extension of any tax cuts, New York's Charles Rangel said Democrats were well aware of that.

Representative CHARLES RANGEL (Democrat, New York): Of course we're concerned. But we're not so concerned that we have to explain to generations that follow why the House of Representatives gave up its legislative authority.

WELNA: But New Jersey's Rush Holt said he did not think Republicans would refuse to allow changes in the agreement worked out with President Obama.

Representative RUSH HOLT (Democrat, New Jersey): Ultimately, the Republicans dare not deny the middle income people their tax benefits and dare not extend the unemployment insurance.

WELNA: So you're calling their bluff?

Rep. HOLT: You might say that.

WELNA: The votes of at least 39 House Democrats would be needed to pass the tax cut package if every House Republican voted for it. Minnesota's Tim Walz says he would be one of those Democrats and he was not happy about the resolution his colleagues approved today.

Representative TIM WALZ (Democrat, Minnesota): I think that it's probably not the right way to go because I don't think there's thought out endgame on this, especially for Americans. If there's a political endgame on this, that's one thing. But a practical endgame is millions without unemployment insurance and millions of Americans at a time of a fragile economy seeing their taxes change and I don't want to be part of that.

WELNA: Senate Republicans reacted to the House Democrats' action by insisting the Senate move ahead with plans to take up and vote on the agreement and send it over to the House. Florida's George LeMieux said it would be irresponsible for those Democrats to abide by the resolution.

Senator GEORGE LEMIEUX (Republican, Florida): And I think that's very disappointing. This is a deal that was worked out in good faith by the president of the United States. He's the leader of their party and Senate Republicans and House Republicans. No one likes all parts of the deal. That's why it's a deal. You give up some.

WELNA: Senate Democrats expressed sympathy for their House counterparts, since many of them also resent having been shut out of the negotiations that led to the tax cut agreement. But Maryland's Ben Cardin expects that agreement to keep moving forward, despite the resolution.

Senator BEN CARDIN (Democrat, Maryland): I don't think it blows it up, I think it expresses their concerns that we need to take a look at some modifications that are consistent with the agreement reached by the president and the Republicans. And my guess is that there will be certain accommodations that are going to have to be made.

WELNA: The Senate is poised to begin debate on the tax cut deal at any moment.

David Welna, NPR News, the Capitol.

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