President Obama Agrees To Republicans Terms On Taxes


Washington (CNN) — The White House will fight Tuesday to get Democrats to support a last-minute deal on taxes that President Barack Obama hammered out with Republican leaders.

The compromise would extend the Bush-era tax cuts for two more years, keeping income tax rates at their current levels for everyone, as Republicans insisted. Obama and other Democrats wanted tax rates to rise only for individuals earning more than $200,000 a year and families making $250,000 or more a year.

The deal Obama announced would also extend unemployment benefits for 13 months and cut payroll taxes from 6.2% to 4.2% for a year. The proposed payroll tax change would leave more money in workers’ paychecks. If implemented, it would mean that someone earning $50,000 a year would pay $1,000 less in Social Security contributions next year. Someone earning $100,000 would pay $2,000 less. The payroll tax rate would go back up to 6.2% in 2012.

The package outlined by Obama could cost $600 to $800 billion over two years, CNN estimates. It doesn’t include any provisions to raise revenue. That suggests that the deficit will go up by that amount at a time when there’s pressure to cut the deficit – a bipartisan presidential panel voted 11-8 this week in favor of spending cuts and tax changes that would cut $4 trillion from the projected deficits between now and 2020.

The 2010 federal budget deficit was $1.3 trillion, and was projected to be somewhat smaller in 2011. That projection doesn’t take the proposed tax deal into account. If Congress doesn’t pass some kind of tax deal by the end of the year, taxes will go up for everyone, since the current rates set under President George W. Bush expire automatically at the end of 2010. Democrats control both houses of Congress, but the Republicans will take control of the House of Representatives in January, and the Democratic majority in the Senate will be smaller than it is now.

Vice President Joe Biden plans to meet Senate Democrats Tuesday to try to win their backing for the deal, but some Democrats have already said Obama conceded too much to Republican demands.

“I’m not at all happy with this. I want to see all the details before I make some kind of commitment,” Democratic Sen. Sherrod Brown of Ohio told CNN Monday.

Asked if Obama “caved” to Republicans, Brown said: “I don’t know if he caved. I think he could have gotten a better agreement.”

Biden will attend the weekly Senate Democratic policy lunch Tuesday in the Capitol to “defend the deal,” according to a Senate Democratic leadership aide.

A revolt by liberal Democrats, particularly in the House, would imperil the chances for the plan to win approval before the end of current lame-duck session of Congress. With the Bush-era tax cuts set to expire at the end of the year, Obama has said it is more important to act now than to continue waging a political fight.

The compromise, worked out in negotiations involving the White House, the Treasury and congressional leaders from both parties, includes provisions that each side doesn’t like, Obama said in a hastily arranged statement to reporters Monday evening, after discussing the proposed deal with Democratic leaders.

“It’s not perfect,” Obama said of the plan, which also would continue tax breaks for students and families contained in the 2009 stimulus bill and allow businesses to write off all investments they make next year.

“We cannot play politics at a time when the American people are looking for us to solve problems,” the president said.

House Democrats, who approved a measure last week extending the Bush-era tax cuts for family incomes up to $250,000 a year, indicated earlier Monday they were unhappy with the negotiations that the White House was conducting with congressional Republicans.

“We won’t rubber stamp a deal between the White House and (Senate Minority Leader) Mitch McConnell,” one Democratic congressional source told CNN. “We want to make it clear. Don’t take our support for granted.”

House Speaker Nancy Pelosi, D-California, and Majority Leader Steny Hoyer, D-Maryland, were among Democratic leaders who attended a White House meeting with Obama and Biden to discuss the proposed deal.

According to the senior Democratic source, Obama and Biden told the congressional Democrats that the proposed deal was the best they could expect.

Democrats contend the nation must prevent working-class Americans from facing higher taxes, as promised by Obama in his 2008 election campaign, but can’t afford the extra hundreds of billions of dollars it would cost to maintain the tax cuts for the wealthy. Republicans argue that the economy remains too weak to allow anyone’s taxes to increase.