Politics & Government

Tax-cut deal leads to revolt

WASHINGTON — Opposition by House Democrats to the tax-cut deal negotiated by President Barack Obama and Republican leaders erupted into open revolt Thursday, threatening to undermine GOP support and rekindling the threat of an increase in income tax withholding for virtually every American worker beginning New Year's Day.

The rebellion came as House and Senate Democratic leaders sought votes to pass the White House deal to extend Bush-era tax breaks with a week remaining before Congress is scheduled to adjourn for the holidays.

The Senate could vote within days, but the developments Thursday thrust the proposal into uncertainty in the House. The White House was forced to defend its deal while trying to accommodate demands for changes.

During an angry and emotional meeting of their caucus, House Democratic lawmakers in a voice vote overwhelmingly recommended not to bring the Obama package to the floor without substantial modification.

"Just say no!" some shouted in the Democratic caucus meeting.

The Democrats were particularly incensed by inclusion of a new estate tax provision that would benefit a few thousand wealthy households — a provision sought by Republicans that has drawn strong Democratic opposition.

"That estate tax is obscene — it's just obscene," said Rep. Jan Schakowsky, D-Ill., emerging from the closed-door meeting. "We're talking about a handful of Americans that we should have to trade for millions of unemployed people, for millions more middle income Americans."

The White House tried for days to quell the discontent among the House Democrats, but the efforts might have backfired after Vice President Joe Biden met with lawmakers earlier in the week and presented the agreement with the GOP as a "take-it-or-leave-it" deal, representatives said.

"Let's leave it," said Rep. Donna Edwards, D-Md.

Said Rep. Peter DeFazio, D-Ore., author of the resolution that led to the voice vote, "We have given our leadership license to force the Senate leadership and the White House back to the table, to get a better deal for the American people."

The setback took Democratic leaders by surprise as the White House has mounted an aggressive campaign to portray the agreement as a needed economic stimulus measure that will boost the economy and create as many as 2 million jobs next year.

It is also the first major challenge to Obama from his party in Congress as he navigates in a new political reality, negotiating with Republicans who will have the majority in the House and larger numbers in the Senate in the new Congress.

White House spokesman Robert Gibbs was optimistic that Congress would act by the year-end deadline, while acknowledging the agreement was a compromise.

"A perfect deal? Not by any means," Gibbs said. "But the nature of compromise is taking enough things to get an agreement through. And I think in the end we will."

The White House ceded to Republican demands to extend the expiring tax cuts approved during the George W. Bush administration — including those for the wealthiest 2 percent of taxpayers who earn more than $250,000, a move most Democrats oppose. In exchange, the administration won several provisions Democrats support.

Among those are an extension through 2011 of unemployment benefits for jobless Americans, including 2 million who are without benefits during the holidays.

The package also includes a 2 percent reduction in the Social Security payroll tax that will provide up to $2,000 for all workers.