House Democrats push tax breaks through committee

WASHINGTON -- Amid new evidence of economic weakness, legislation at the heart of President Obama's recovery plan advanced in Congress Thursday over the opposition of Republicans seeking deeper tax cuts.

"We are very pleased with the progress," said Speaker Nancy Pelosi, D-Calif., after $275 billion in tax cuts cleared the House Ways and Means Committee on a party-line vote of 24-13. Democratic leaders have promised the measure will be ready for Obama's signature by mid-February.

"It will create jobs immediately, and it will also lay the foundation for economic stability as we go forward," Pelosi added.

But Republicans said there was no reliable estimate of the bill's impact on employment.

"The American people deserve to know what they are getting for their nearly $1 trillion," said Rep. Dave Camp of Michigan, the top Republican on the tax-writing committee.

On the key vote of the day, Democrats closed ranks to preserve a tax break for this year and 2010 that would mean $500 for many workers and $1,000 for millions of couples, including those whose earnings are so low that they pay no federal income tax.

Democrats also turned back a Republican attempt to jettison a new federal subsidy to help laid-off workers pay for health insurance after they lose employer-paid coverage, and to waive income taxes on unemployment benefits for two years.

They argued that the GOP proposals would favor upper-income individuals and couples who, they said, benefited disproportionately from tax cuts passed during the administration of former president Bush.

"We need to be dealing with people at the bottom of the income scale," said Rep. Jim McDermott, D-Wash. He also noted that the legislation would provide a $25-per-week increase in unemployment benefits.

But Camp cited a report by the nonpartisan Congressional Research Service that he said showed lower and middle-income workers already would have received most of the benefits from the proposal to eliminate the tax on unemployment benefits.

Separately, the House Energy and Commerce Committee approved $2.8 billion to expand broadband service into underserved areas and billions more for new spending to promote energy efficiency. The panel worked into the evening on other proposals, including money to help states afford increased enrollment under Medicaid, the health care program for the low income.

During a recession, enrollment traditionally rises in programs such as Medicaid, food stamps and unemployment insurance as workers lose their jobs and their incomes.

Congressional committees did their work as government reports showed the number of newly laid-off Americans filing jobless claims and the pace of home construction both posted worse-than-expected results. Additionally, Microsoft Corp. said it would slash up to 5,000 jobs over the next 18 months, while chemical maker Huntsman Corp. said it would cut more than 1,600 employees and contractors combined.

Democrats have an oversized majority on the tax-writing committee, as they do on all committees, the result of election gains in the fall. While Republicans sought several changes in the legislation, the proceedings were devoid of drama or even emotion.

Republicans in both the House and Senate are developing alternatives to the Democratic legislation, and Rep. John Boehner of Ohio, the GOP House leader, announced a meeting next week with Obama.

"Our plan offers fast-acting tax relief, not slow-moving and wasteful government spending," he said, referring to a study by the Congressional Budget Office questioning administration claims the money could be spent fast enough to reduce joblessness quickly.

Not all Democrats were completely pleased with the legislation making its way to a vote on the House floor next week.

The portion of the measure ticketed for highway and bridge construction, $30 billion, is far less than some favor, and there was grumbling.

"This bill ... is not even near what we need for short-term needs and it does not in any meaningful way address the long-term needs for our country," said Rep. Peter DeFazio, D-Ore., although he added, "It is better than nothing."

There was outright opposition in the House to another element of Obama's economic recovery program, but it was entirely symbolic.

On a vote of 270-155, lawmakers voted to block use of the remaining $350 billion in the financial industry bailout created last fall. Among the opponents were 90 Democrats.

The Senate cleared the way for Obama to use the money last week, so the House vote was little more than a chance for individual lawmakers to vent their opposition. Some Democrats took advantage of the opportunity. "There's a massive transfer of wealth going on, taking money out of the pockets of the American people and putting it into these banks. This has to stop. We have to stop," said Rep. Dennis Kucinich, D-Ohio.

The tax cuts that won committee approval included a $500 credit for workers making up to $75,000 per year. Couples with incomes up to $150,000 a year would receive a $1,000 credit. Individuals with incomes up to $100,000 and couples earning up to $200,000 would qualify for lesser tax breaks.

The Republican alternative envisioned a different approach.

It called for reducing the current 10 percent bracket to 5 percent, affecting a taxpayer's first $8,350 in income, and lowering the existing 15 percent bracket to 10 percent, covering income from $8,351 to $33,950.

The legislation that cleared committee also would provide a temporary $2,500 tax credit to help pay for college, and includes breaks to encourage the production of renewable energy resources.

For businesses, the measure includes $29 billion in tax cuts to encourage investment in new plants and equipment, and to permit money-losing firms to claim refunds on taxes paid up to five years ago, during profitable times.