White House Clashes With House Democrats Over Tax Deal

House Democrats reject Obama's plan to extend the Bush tax cutsPolitical tides can turn quickly and violently, as President Obama found out this week. Fresh off of successful negotiations with Republican leadership on Monday over the tax-cut extension package, Obama received a sharp rebuke from his own party who voted today to reject the proposal.

House Speaker Nancy Pelosi (D-Calif.) released a short, carefully-worded press release confirming that Democrats would continue to oppose the current plan. She vowed, however, to keep working with Republicans to find a solution:
"We will continue discussions with the President and our Caucus in the days ahead. Democratic priorities remain clear: to provide a tax cut for working families, to promote policies that produce jobs and economic growth, and to assist millions of our fellow Americans who have lost their jobs through no fault of their own."
Many Democrats in the House felt that the final package negotiated by the White House was too generous to Republicans, a message that Speaker Pelosi appeared to echo in her remarks. Specifically, Democrats believed that the final compromise offered too many cuts to those at the top while not providing enough relief to the middle class.

Singled out for criticism were changes to the federal estate tax. Republicans wanted a complete repeal of the tax while Democrats were comfortable letting the estate tax revert to pre-2001 legislative levels. Those levels would mean an exemption of $1 million per taxpayer (or, with planning, $2 million per married couple) with a top tax rate of 55%. The final deal, however, provides for an exemption of $5 million per taxpayer (or, with planning, $10 million per married couple) with a top tax rate of 35%, the lowest since 1931.

For its part, the White House insists that the package represents significant relief for the middle class. The administration pointed to a study by the Center on Budget and Policy Priorities which indicated that more than half of the deal benefited the middle class and provided Alternative Minimum Tax (AMT) relief.

Despite the grumbling from the Hill, the President remains optimistic. White House spokeswoman Jen Psaki responded to the controversy by expressing confidence "that the major components" of the tax compromise will pass.

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