Obama Tax Cuts Rejected In House

Obama's Tax Cut Plan Voted Down In House
House Speaker John Boehner of Ohio, and other GOP leaders finish a news conference at the Republican National Committee on Capitol Hill in Washington, Wednesday, Aug. 1, 2012. (AP Photo/J. Scott Applewhite)
House Speaker John Boehner of Ohio, and other GOP leaders finish a news conference at the Republican National Committee on Capitol Hill in Washington, Wednesday, Aug. 1, 2012. (AP Photo/J. Scott Applewhite)

WASHINGTON -- The House of Representatives made its election-year arguments Wednesday in the tax-cut battle roiling Capitol Hill, rejecting a plan to preserve middle-class breaks while backing a measure that safeguards wealthier taxpayers.

The Democratic bill resembled President Barack Obama's tax plan, which calls for letting the Bush-era tax cuts expire for incomes of more than $250,000 for couples and $200,000 for individuals. The Republican measure would extend all the Bush-era tax cuts for all income levels, but end breaks passed in 2009 that help about 25 million middle-class households.

Each side made stark arguments, with Democrats casting the issue as protecting the middle class, and Republicans countering that they were safeguarding small businesses and jobs.

"The president wants to raise taxes on the so-called rich," said House Speaker John Boehner (R-Ohio). "Well, let me tell you who the so-called rich are. About a million of those people that you want to increase taxes on are small business owners."

"Their priority is cutting taxes of the very wealthy in this country," countered Rep. Sandy Levin of Michigan, the top Democrat on the tax-writing Ways and Means Committee. "They want to give households that earn more than $1 million a year a tax cut –- on average –- of $160,000 next year."

To back up the Republican argument, Boehner pointed to a study by Ernst & Young -- paid for by industry groups -- that estimated the Democrats' partial extension would cost 710,000 jobs.

"If you do this, 750,000 jobs are going to be destroyed at a time when the American people are asking where are the jobs," said Boehner, slightly misstating the estimate. "It's time to put the rhetoric aside. It's time to politics aside -- I know we're in an election year, but my goodness. Raising taxes at this point in this economy is a very big mistake."

Democrats argued that the study was a sham because it did not actually analyze the Democratic plan, leaving out, among other things, the alternative tax breaks Obama is seeking for businesses. They pointed to other data, noting that with the Bush tax cuts in place, the country saw net job losses, and unemployment rose.

Rep. Bill Pascrell (D-N.J.) derided the policy as "supply-side voodoo," echoing criticism first made by George H. W. Bush. Pascrell noted that since the George W. Bush cuts were passed in 2001 and 2003, the income gap in America has grown.

"To those members concerned with tax fairness, today, wealth concentrated with the top 1 percent is at the same level as the period immediately preceding the Great Depression," Pascrell said. "So you shrunk the middle class with your great economic ideas between 2001 and 2008, and what you did, what you did is made the rich richer. I salute you."

Reaffirming the political link -- and to counter the argument that Democrats would tax small businesses -- a number of Democrats tied the GOP plan to Mitt Romney, the presumptive Republican presidential nominee, and Bain Capital, the investment firm Romney founded.

"These are not mom-and-pop businesses," said Rep. Chris Van Hollen (D-Md.), arguing that only 3 percent of businesses with fewer than 500 employees would face tax hikes. "Bain Capital. Bain Capital [is] the kind of small business that our Republican colleagues are trying to protect."

Democrats also argued that with the expiration of the 2009 cuts -- the child tax credit, a bigger earned income tax credit and a break on college tuition -- middle-class families would face on average a $1,000 tax hike.

Ways and Means Committee Chairman Dave Camp (R-Mich.) derided those tax breaks as government spending.

"These are spending items that failed in the stimulus bill," Camp said. He and Republicans insist that their bill, which, like Obama's, would last for one year, would do no harm and buy time to reform the tax code after the elections.

""Extending all these rates for one year will provide certainty," Boehner said.

Democrats argued that preserving the tax cuts for everyone earning less than $250,000 would provide certainty for 98 percent of the country, and for the economy, because the middle-class cuts have already passed the Senate and Obama has said he would sign that measure.

The failure of Congress to agree on taxes on the remaining 2 percent of Americans guarantees that the argument will be carried through to the campaign trail over the summer, and will be a prime debating point in the fall when Congress returns from its summer break.

Congress recesses after this week until September.

The Democrats' bill failed, 170 to 255, with nearly 20 members of their own party voting against it. Democrats also failed 181 to 246, to ad an amendment to the GOP bill that would exempt incomes above $1 million from the Bush cuts and ad other small business tax breaks. The Republican version, H.R. 8, passed 256 to 171, with 20 Democrats for it.

Michael McAuliff covers Congress and politics for The Huffington Post. Talk to him on Facebook.

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