Bush Tax Cuts - Extension of Bush Tax Cuts

Extension of Bush Tax Cuts

The issue came to a head in late 2010, during a lame-duck session of the 111th Congress.

At the "Slurpee Summit" of November 30, President Barack Obama appointed Treasury Secretary Tim Geithner and Office of Management and Budget chief Jack Lew to help Republicans and Democrats hammer out an agreement on extending the Bush tax cuts. All 42 Republican Senators pledged to block all legislation in the lame-duck session until the tax matter was settled.

Congressional Democrats offered two attempts to extend the Bush-era rates for "middle income" families but restore the previous, higher rates for "high income" people. The first proposal had a cutoff at $250,000, while the second raised the dividing line to $1 million. Both proposals were able to pass in the House, but on December 4, 2010, both fell short of the 60 votes required to avoid a filibuster.

On December 6, 2010, President Barack Obama announced a compromise tax package proposal had been reached, centered around a temporary, two-year extension of the Bush tax cuts. In particular, the framework included key points such as:

• Extending the 2001/2003 income tax rates for two years. Also, reforming the AMT to ensure an additional 21 million households will not face a tax increase. These measures are intended to provide relief to more than 100 million middle-class families and prevent an annual tax increase of over $2,000 for the typical family.
• Additional provisions designed to promote economic growth. $56 billion in unemployment insurance, an approximate $120 billion payroll tax cut for working families, about $40 billion in tax cuts for the hardest hit families and students, and 100 percent expensing for businesses during 2011.
• Estate tax adjustment. Rates would be 35 percent after a $5 million exemption.

Obama said, "I'm not willing to let working families across this country become collateral damage for political warfare here in Washington. And I'm not willing to let our economy slip backwards just as we're pulling ourselves out of this devastating recession. ... So, sympathetic as I am to those who prefer a fight over compromise, as much as the political wisdom may dictate fighting over solving problems, it would be the wrong thing to do. ... As for now, I believe this bipartisan plan is the right thing to do. It’s the right thing to do for jobs. It’s the right thing to do for the middle class. It is the right thing to do for business. And it’s the right thing to do for our economy. It offers us an opportunity that we need to seize."According to Kori Schulman (2010), Director of Online Engagement for the Whitehouse media team, the agreement has three accomplishments: “working families will not lose their tax cut, focused on high impact job creation measures, and does not worsen the medium-and-long-term deficit.”

Administration officials like Vice President Joe Biden then worked to convince wary Democratic members of Congress to accept the plan, notwithstanding a continuation of lower rates for the highest-income taxpayers. The compromise proved popular in public opinion polls, and allowed Obama to portray himself as a consensus-builder not beholden to the liberal wing of his party. The bill was opposed by some of the most conservative members of the Republican Party as well as by talk radio hosts such as Rush Limbaugh and some groups in the Tea Party movement. It was also opposed by several leading potential candidates for the Republican nomination in the 2012 presidential election, including Mitt Romney, typically on the grounds that it did not make the Bush tax cuts permanent and that it would overall increase the national deficit.

In an interview during these debates, former President Bush said, "I wish they would have called it something other than the 'Bush tax cuts'. There'd probably be less angst amongst some to pass it." He argued strongly for maintaining the rates: "I do believe it's very important to send the signal to our entrepreneurs and our families that the government trusts them to spend their own money. And I happen to believe lower taxes is what stimulates economic growth and what we need now in our country is economic growth."

On December 15, 2010, the Senate passed the compromise package with an 81–19 vote, with large majorities of both Democrats and Republicans supporting it. Near midnight on December 16, the House passed the measure on a vote of 277–148, with only a modest majority of Democrats but a large majority of Republicans voting for the package. Before that, an amendment put forward by Democratic Representative Earl Pomeroy and the progressives among the Democratic caucus to raise the estate tax, which was the ultimate sticking point of the deal for them and the cause of a minor revolt among those against it, failed on a 194–233 vote. The Washington Post called the approved deal "the most significant tax bill in nearly a decade." President Barack Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, on December 17, 2010.