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Congress set to approve extension of Bush-era tax cuts for two years


taxes from A1


breaks would eventually become permanent, setting lower tax rates far into the future. That would increase pressure on law- makers to cut spending as a way of reducing record federal bud- get deficits, placing a host of cherished social programs in jeopardy. But for Obama, the two-year


window represents an opportu- nity to tackle the ambitious task of overhauling the federal tax code. By sunsetting current poli- cies immediately after the 2012 presidential election, lawmak- ers in both parties said, the measure would set up a natural timetable for developing a tax- reform plan — an essential step toward reining in the rising national debt. When Obama placed numer-


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ous calls to House Democrats this week to urge their support for the deal, he got an earful in return. Rep. Elijah Cummings (D-Md.) said he told the presi- dent that one of his concernswas that “these tax cuts would not end in 2012, because in an elec- tion year, I think it’s very, very difficult” to raise taxes. Obama replied that the fate of


the Bush tax cuts “would be part of his platform when he ran,” Cummings said. “So it should be very interesting.” Republicans, too, have been


pressing for a temporary exten- sion of the Bush tax cuts as a bridge to tax reform. Like the last major tax overhaul in 1986, a newrewrite is likely to take years to draft and push through Con- gress. But White House officials have been encouraged by the


level of engagement fromRepub- licans, who will hold 47 seats in the Senate and take control of the House in January. Key lawmakers in both par-


ties have embraced a deficit-re- duction plan produced by Obama’s fiscal commission, which includes a tax overhaul that would lower rates across the board but raise additional revenue by closing dozens of long-standing loopholes, such as the mortgage-interest deduc- tion claimed by many home- owners. Meanwhile, the relative ease with which Obama and the GOP were able to strike a deal over the Bush cuts has raised hopes on both sides for produc- tive talks in the future. “This is consensus on a very


intractable issue:What do we do about expiring tax policy?” said Rep. Dave Camp (R-Mich.), the incoming chairman of the tax- writing House Ways and Means Committee. Camp, who has made comprehensive tax reform a top priority, said talks with the White House over the tax bill were significant not only because of the policy that emerged “but also because of the process of coming together and reaching an agreement.” “I amvery encouraged bywhat


the president has been saying publicly. They do want to begin,” Camp said. “And that is a big thing.” The bipartisan tax talks had


another benefit:Unlike the pork- laden, $1.2 trillion annual spend- ing bill that was jettisoned in the Senate late Thursday, the tax bill is virtually free of unrelated add-ons. Negotiators, in fact, ex- cluded more than 70 temporary


on washingtonpost.com More on tax cuts


6 6


A graphic breaks down the compromise on extension.


wapo.st/tax-details


On Faith: Are tax cuts for the wealthy moral?


wapo.st/faith-tax


programs from the bill, includ- ing federal subsidies for state and local borrowing known as Build America Bonds, a sales tax deduction for new cars and trucks, a property tax deduction for people who don’t itemize on their tax returns and an exemp- tion from taxes for the first $2,400 of unemployment bene- fits. All those provisions will be allowed to expire. Although Democrats were un-


happy with the deal, Obama negotiated with Republicans only after Democratic lawmak- ers refused formonths to address the issue of the expiring Bush tax cuts, raising alarm at the White House. Economists said a parti- san standoff could wreak havoc on the economy by increasing withholding in virtually every worker’s paycheck in January, imposing a tax hike of about $3,000 next year on a typical family, according toWhiteHouse estimates. The concern was so great that


Obama ultimately decided to break his long-standing vow to eliminate the Bush tax cuts for the wealthiest 2 percent of tax- payers. But with unemployment stuck near 10 percent, he was able to negotiate a big new dose of support for the economy,


which Republicans had vowed to oppose. In addition to the payroll tax


holiday,Obamawon a $57 billion extension of emergency unem- ployment benefits that will keep the program, which expired last month, alive through the end of next year. Republicans also agreed to support the largest temporary investment incentive in U.S. history, which permits businesses to deduct 100 percent of equipment purchases in the 2011 tax year. For Democratic lawmakers,


themost objectionable provision was a deal to reinstate the estate tax at 35 percent and to exempt estates worth asmuch as $5mil- lion. Republicans have long ar- gued that what some call the “death tax” is a threat to family farms and small businesses, though the nonpartisan Tax Poli- cy Center estimates that only 100 family farms and small business paid the tax in 2009, when a smaller, $3.5 million exemption was in effect. The votes Thursday night


were likely the final major legis- lative actions for theHouseDem- ocratic majority, a low note fol- lowing the party’s landslide loss- es last month. Rep. Louise M. Slaughter (D-N.Y.) called the es- tate tax provision “an atrocious giveaway in a nation riddledwith debt and unemployment.” And Rep. Gene Taylor (D-Miss.), one of the defeated Democrats, deliv- ered an impassioned speech be- fore the vote, ending with the question “How much debt is enough?” montgomeryl@washpost.com murrays@washpost.com


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