A critical compromise to head off a year-end tax increase for millions of Americans took shape in private talks between the White House and congressional Republicans on Thursday, and an extension of unemployment benefits for many others appeared likely to become part of any deal.
The Obama administration sought to expand the package with other provisions that officials said would accelerate the nation’s sluggish economic recovery. They included a tax break providing as much as $400 for individual working people and $800 for couples — even if they pay nothing to the IRS.
Two days after he and newly empowered Republicans exchanged pledges of cooperation at the White House, President Barack Obama expressed optimism about the prospects for agreement in time for enactment by year’s end.
Still, he cautioned, “That doesn’t mean there might not be some posturing over the next several days.”
Not long after he spoke, Democrats ignited a partisan row in the House with legislation that would prevent taxes from rising on lower- and middle-income wage earners but allow them to rise for people at higher incomes.
The measure has no chance of passing the Senate, and Obama already has signaled he will accede to Republican demands for extending tax cuts at all income levels, making the vote purely symbolic.
The measure drew withering criticism from Rep. John Boehner of Ohio, who will become the House speaker when Republicans take power in January. “I am trying to catch my breath so I don’t to refer to this ... as uh, chicken crap, all right?” he said.
“But this is nonsense, all right? The election was a month ago,” he said, referring to voting that swept Democrats from power in the House and reduced their majority in the Senate.
The bill passed, 234-188, largely along party lines.
The vote was followed by a meeting of Treasury Secretary Tim Geithner, Budget Director Jacob Lew and senior lawmakers to discuss the compromise plan to extend existing cuts for taxpayers at all income levels.
The outlines of the measure include an extension of income-tax cuts enacted while George W. Bush was president for an as-yet- undetermined period of time, perhaps two or three years. The bill is expected to apply to personal income-tax rates as well as capital gains, dividends, the alternative minimum tax, the so-called marriage penalty and more.
Any agreement on legislation extending tax cuts to those at upper income levels would mark a surrender on the part of the president, who long has argued the provision isn’t warranted in view of the $700 billion cost to the deficit.
At the same time, any measure that was limited to an extension of two or three years would leave Republicans with less than the permanent tax cuts they have long sought.
The impetus for an extension of expiring jobless benefits came from the Democrats, although Republicans have signaled they are willing to agree as long as the cost doesn’t add to federal deficits.
Two Senate Republicans, Sens. Scott Brown of Massachusetts and Olympia Snowe of Maine, have drafted legislation for a one-year, $65 billion extension of benefits. The cost would be covered by cutting funds that already have been approved for government agencies but not yet spent.