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House Scraps Vote on Boehner’s Tax Plan Lacking Support

By Richard Rubin and Roxana Tiron
December 20, 2012 9:45 PM EST 63 Comments
House Speaker John Boehner takes a question during a news conference in Washington. Boehner and Jay Carney, the White House spokesman, both left open the possibility that high-level budget talks could resume and that a broader agreement is possible.
Photographer: Andrew Harrer/Bloomberg
House Speaker John Boehner takes a question during a news conference in Washington. Boehner and Jay Carney, the White House spokesman, both left open the possibility that high-level budget talks could resume and that a broader agreement is possible.

House Republican leaders canceled a planned vote tonight on Speaker John Boehner’s plan to allow higher tax rates for annual income above $1 million, throwing already-stalled budget talks deeper into turmoil.

“The House did not take up the tax measure today because it did not have sufficient support from our members to pass,” Boehner, an Ohio Republican, said in a statement. He called on President Barack Obama and Senate Majority Leader Harry Reid to come up with legislation to avoid more than $600 billion of tax increases and spending cuts scheduled to start in January.

Standard & Poor’s 500 Index futures dropped 1.5 percent amid mounting concern that Congress will be unable to resolve the budget standoff with just 11 days left before the deadline.

The failure is a setback to Boehner, casting doubt on his ability to muster votes from Republicans to pass any compromise that would win support from Obama and in the Democratic-led Senate. Anti-tax advocates within his party didn’t want to support a bill that would let some taxes go up, and now Boehner may have to rely on Democratic votes.

“The president’s main priority is to ensure that taxes don’t go up on 98 percent of Americans and 97 percent of small businesses in just a few short days,” White House spokesman Jay Carney said in an e-mailed statement. “We are hopeful that we will be able to find a bipartisan solution quickly.”

‘When Needed’

Boehner said he will call Obama, said Representative Steven LaTourette of Ohio. A House leadership announcement said the chamber will hold no more votes until after the Christmas holiday and will return “when needed.”

“The odds go up that we go over the fiscal cliff,” said Representative Rob Bishop of Utah, a Republican.

The failure of what Boehner called Plan B made it less clear what budget legislation the House or Congress could pass. The White House had said it would veto the tax bill and Reid had said it was dead on arrival in the Senate.

Many Republicans, including Mick Mulvaney of South Carolina and Tim Huelskamp of Kansas, were wary of voting for a bill that allowed tax rates to go up for anyone.

Boehner’s inability to pass his tax alternative is “certainly a victory for conservative principles,” Huelskamp said. Boehner removed the Kansas lawmaker from the House Budget Committee after he opposed the speaker on prior spending and budget issues.

Bigger Problems

The vote’s cancellation “didn’t solve the problem but it avoids creating bigger problems, Republicans caving on core principles,” Huelskamp told reporters.

Republicans spent the day trying to muster support for their legislation, using votes on unrelated bills to bring members to the floor and asking Republican senators to call House members.

Just after 7 p.m. in Washington, instead of starting debate on the bill, leaders began a recess. Boehner conferred with his leadership then called a 7:45 p.m. meeting.

That meeting lasted fewer than 15 minutes as Boehner told his colleagues he didn’t have enough votes to bring the bill to the floor. Republicans have 241 members of the 435-member House.

Boehner started the meeting with a prayer for serenity and then read to the conference his statement that a few moments later was released to the press, according to a person who was in the room and sought anonymity to discuss the private meeting.

“It was just too big a hill to climb,” said Texas Republican Joe Barton said.

Controlling Members

Democrats saw the failed attempt as proof that Boehner can’t control his own members.

Representative Chris Van Hollen, a Maryland Democrat, said on Bloomberg Television tonight that Boehner should have a vote on an Obama-backed proposal that would allow tax rates to go rise for households earning $250,000 or more, even if it undermines his support among Republican.

“That’s the risk he takes,” Van Hollen said. “I would hope he would put the country before Republican caucus politics.”

Fewer than two weeks remain to avert the so-called fiscal cliff, set to start in January. The Congressional Budget Office has said that a failure to avert those changes would probably lead to a recession in the first half of 2013.

If Congress doesn’t act, tax rates for income at all levels would rise next month, along with taxes on estates, capital gains and dividends.

Spending Cut

Earlier, Republicans barely got enough votes to pass a spending-cut measure they brought up in a bid to gain support for Boehner’s bill among lawmakers wary of increasing tax rates without also reducing federal program costs.

That bill passed 215-209 with one member voting present. It would eliminate most of the automatic cuts scheduled for 2013 and replace them with $314.5 billion worth of other cuts to food stamps, federal workers’ benefits and other programs.

Republicans have held a firm anti-tax stance for 22 years.

Boehner’s measure would permanently extend tax cuts for almost everyone, and Republicans sold it to their members as the best deal they could hope for with Obama in office. They had scheduled the vote over the objections of anti-tax groups such as the Club for Growth and the Heritage Foundation.

Under Boehner’s bill, on incomes above $1 million, the tax rate on ordinary income would go to 39.6 percent from 35 percent, and the top rate on capital gains and dividends would go to 23.8 percent from 15 percent, including a 3.8 percent tax from the 2010 health care law that starts in January.

$400 Billion

Compared with continuing current policies, the bill would probably raise between $300 billion and $400 billion, based on official estimates of other proposals.

The bill would extend current estate tax policy, which has a $5.12 million per-person exemption indexed for inflation and a 35 percent top rate. It would permanently prevent the expansion of the alternative minimum tax.

Some lawmakers expressed uncertainty about the path ahead even before Boehner’s decision. “Don’t make me lie to you,” said Representative Charles Rangel, a New York Democrat first elected to Congress in 1970. “I have no idea what the hell is happening.”

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Roxana Tiron in Washington at rtiron@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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