House passes tax extension bill

By Karoun Demirjian

Thursday, Dec. 16, 2010 | 11:20 p.m.

The House of Representatives cleared a comprehensive tax extension bill in the final seconds of Thursday night, sending the two-year framework of tax cuts, unemployment insurance extensions and temporary payroll tax holidays back to the president, who drafted them, for his signature.

Obama’s bill, negotiated with Republicans, caused a lot of heartache along the way, especially among House Democrats, who called it everything from a “piece of crap” to morally corrupt.

Harsh disagreement among House Democrats, most of whom wanted to see an extension of tax cuts only on income levels up to $250,000, actually threatened to tank the whole process.

Caucus members spent the better part of the last week huddling in various meetings to negotiate a way out of the growing impasse, delaying votes and ultimately reaching a deal to satisfy both the practical and political demands of the situation.

House Democrats boiled down their various objections against the bill to one, key issue: the estate tax plan, which almost exactly mirrors language in a bill that Nevada’s Rep. Shelley Berkley first introduced.

While she isn’t directly credited for the language — that goes to Republican Senate Minority Whip Jon Kyl and outgoing Arkansas Democrat Blanche Lincoln — it’s effectively the same bill she’s been pushing from earlier this year in the House.

That put Berkley in a tight spot, as she pushed back against her caucus to preserve her tax cut plan but confessed early on that she’d vote for the bill whether it was in or out.

The discrepancy is as follows: Berkley’s, and the president’s, plan sets the estate tax rate at 35 percent, with an exemption for the first $5 million inherited, $10 million if filing as a couple. That’s what was ultimately adopted.

It’s a much sweeter deal than what exists now — a 45 percent rate with an exemption for the first $3.5 million inherited or $7 million if filing as a couple.

That’s the rate and exemption ceiling Democrats wanted to preserve, arguing that it’s already the lowest estate taxes have been in 77 years, and pointing out that the difference only catches 6,600 estates in the balance nationwide — a small number of people nonetheless worth $100 billion in tax revenue over ten years.

But Democrats couldn’t pull enough votes for an alternative that would have subbed out the estate tax language and sent the bill back to the Senate. Their attempt failed on a vote of 194-233.

In Nevada’s delegation, outgoing Democratic Rep. Dina Titus was the only one to support the attempt; Berkley and Republican Dean Heller voted against it.

But in the end, all three Nevada representatives voted to pass the bill — which was approved by 277-148, a decisive margin.

“I represent a working-class town. People think of Las Vegas as glitz and glitter. But it’s glitzy and glittery because of all the working men and women that call Las Vegas home,” Berkley said. “The extension of those unemployment benefits is critical to the survival of thousands of the families that call Las Vegas home.”

Heller did not declare his intentions until just before the vote, and there was some speculation as to whether he might vote against it in the name of reducing spending, as Nevada’s John Ensign did in the Senate on Wednesday. Heller was the one member of the Nevada delegation not to request earmarks under the federal budget, which as of Thursday evening is no longer under consideration.

But in the end, he said, he voted to prioritize the tax cuts over his concerns about spending.

“The good outweighs the bad in this particular piece of legislation,” he said. “Eighty-eight percent of this bill is tax cuts, or at least not tax increases. To me, eighty-eight percent of this bill, I like.”

Heller said had the estate tax switch passed, he would have voted against the bill. “I think the estate tax should be zero,” he said, also calling the estate tax “the worst provision we have in law today.”

The president is expected to sign the bill into law soon, which will avoid the doomsday scenario of tax hikes and program expirations that had been threatened. In addition to extending tax cuts by two years, unemployment insurance by 13 months and reducing the payroll tax by 2 percent, the bill includes a correction for the Alternative Minimum Tax, continuation of tax credits for children and earned income, and a program to convert solar, wind, and geothermal energy research and development tax credits to cash grants.

But with the longest extension in the bill only being for two years, it’s clear that lawmakers — Berkley and Heller especially, as they sit on the Ways and Means Committee — are going to be back in the trenches soon, likely hashing out a far more existential, philosophical and far-reaching outline on taxes.

“This is far from over,” Heller said.