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Financial Planning > Tax Planning

H.R. 4853: Prospects Improving in House

By Allison Bell

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House Democrats seemed to be moving Tuesday toward letting a tax measure that includes major estate tax and foreign life and annuity tax provisions pass.

The tax measure — Senate Amendment 4753 to H.R. 4853, a bill that originally was an airport and airways trust fund bill — continued to draw fire from many House Democrats, but other House Democrats were announcing plans to support the measure.

President Obama negotiated the measure, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, with Senate Minority Leader Mitch McConnell, R-Ky., and House Minority Leader John Boehner, R-Ohio, who is preparing to succeed Nancy Pelosi as speaker of the House.

The measure would preserve extended unemployment insurance benefits for 13 months. The measure also would extend a number of tax breaks created by the Economic Growth and Tax Relief Reconciliation Act of 2001. One little-noticed provision, Section 750, would extend rules in Internal Revenue Code Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act Section 953 and Section 954 that affect some life insurers’ income taxes. Another provision, which has drawn harsh attacks from many Democrats, would set the estate tax personal exemption at $5 million for 2 years and set the top estate tax rate at 35%.

Members of the Senate voted 83-15 Monday to limit debate on the measure to 30 hours. The vote on the debate limit, or cloture motion, would permit Senate leaders to bring the measure to the Senate floor as early as Wednesday.

Some House Republicans, such as Rep. Jeff Flake, R-Ariz., oppose the measure, arguing that it would increase the federal budget deficit, but Republican leaders seem to be sure that they can get strong Republican support for the measure in the House. The measure could still die in the House, or emerge in an amended form that cannot get through the Senate, if large numbers of Democrats make good on threats to vote against it.

Despite the Senate cloture vote, many House Democrats continued to blast the measure.

Rep. Rush Holt, D-N.J., today said he opposes the measure because it includes a payroll tax holiday provision that he believes could hurt the solvency of Social Security.

“This tax agreement isn’t just a matter of tweaking the tax code for a couple of years,” Holt says in a statement. “This agreement, as it stands, would fundamentally change the way we treat Social Security. We should not leave town if it means using Social Security as a rainy-day fund to allow some in Washington to give tax cuts to the wealthiest 2% of Americans.”

At The Washington Post, Ezra Klein is suggesting that the House might effectively kill the measure by amending it and requiring supporters to try to rush it back through the Senate.

But poll results released this week by Gallup, ABC/Washington Post and the Pew Research Center all show that a plurality or majority of the participants said they support the measure.

Rep. Peter Welch, D-Vt., a leader of efforts to block the measure, reportedly told The Hill, that he believes the measure will pass. “The bottom line is that it is a fast moving train,” Welch said, according to The Hill. “Washington is doing what it is finding easy to do.”

The Huffington Post says at least 27 of the 54 members of the relatively conservative Blue Dog Democratic caucus have signed a letter asking House Speaker Nancy Pelosi, D-Calif., to help pass the tax measure as quickly as possible.

Some other Democrats who are not Blue Dogs, such as Rep. William Delahunt, D-Mass., have been announcing that they too will support the measure.

Delahunt, who is retiring, says he will support the measure because 2 million unemployed Americans would suffer if unemployment benefits ran out.

Rep. Danny Davis, D-Ill., says House Democrats have no choice but to let the measure pass as written.

“There are any number of ways which the proposal could be modified to make our tax code more fair and equitable,” Davis says. “None of those options appear to have any chance of passage in the Senate because of the obstinate stand of my Republican colleagues in that body.”

Members of Congress have to choose between voting for a bad agreement now or watching “masively tragic consequences” starting in a few weeks, when millions of Americans lose access to unemployment insurance, Davis says.

“I have come to the conclusion that the best interests of my constituents will be served by voting for the agreement and resolving today to use every opportunity to reverse and modify the onerous features of the agreement in favor of an equitable and fair tax system and aid and protection for those who have lost their jobs in the days ahead,” Davis says.

Rep. Chaka Fattah, D-Pa., says he opposes the estate tax provisions in the tax measure but supports the need to extend unemployment insurance.

“There are 73,000 unemployed Philadelphians whose jobless benefits are expiring,” Fattah says. “Our city’s unemployment rate was 11.2% in September…. These Philadelphians need help, here and now. They are waiting for us to act. They cannot wait for the ‘perfect’ solution from an imperfect and divided Washington.”

Rep. Bill Owens, D-N.Y., says he supports the measure and hopes Congress will be able to take another look at tax rates for wealthy Americans when the economy is stronger.

“Middle-class families and small businesses are the backbone of the American economy,” Owens says. “They have been hit hardest by the economic downturn, and provisions in this compromise may be the difference that allows them to make ends meet and ensures the economy continues to recover. That is why I’m urging my colleagues in Congress to not only pass this compromise, but to make it the first of many bipartisan agreements that move our country forward in the coming year.”

Rep. Mazie Hirono, D-Hawaii, says she is still not sure how she will vote on the measure.

“I have heard from those of you who want me to vote against this proposal and those of you who want me to ‘hold my nose’ and vote for it,” Hirono says in a letter to constituents posted on her website. “What’s clear is that both groups want the middle class tax cuts and unemployment benefits to be extended—goals I strongly support through my votes and in remarks on the House floor…. I continue my own outreach to community leaders in Hawaii to hear their views, pro and con. I will be guided by what I honestly believe would be best for Hawaii and for the people we fight for.”

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