The House approved an $858 billion extension of the Bush-era tax rates and unemployment benefits late Thursday night, a day after the Senate approved the bill, sending the bill to President Obama’s desk.

Nancy Pelosi

After procedural hurdles held up the vote for much of the day on Thursday, the House reconvened in the evening to settle the terms of the debate. Amid widespread dissatisfaction among House Democrats over the terms of the deal struck by President Obama and Republican congressional leaders, especially on setting the estate tax at a rate of 35 percent for estates over $5 million, they agreed to first hold a vote on an amendment by Rep. Earl Pomeroy, D-N.D., which would set the estate tax rate at 45 percent for inheritances over $3.5 million. That amendment was defeated by a vote of 233 to 194.

The House next proceeded to a vote on the bill passed by the Senate on Wednesday, and that passed by a vote of 277-148 (see Senate Passes Bush Tax Cut and Unemployment Extension).

The bill includes a two-year extension of the Bush-era income tax rates, including those for dividends and capital gains. It also extends emergency unemployment insurance for another 13 months. The bill would also lower Social Security payroll taxes by 2 percentage points from 6.2 percent to 4.2 percent for a year. Several lawmakers, however, criticized that provision, saying it would weaken the Social Security trust fund and pointing out that it would not be open to those government employees who do not pay Social Security withholding taxes.

The bill would also extend the Child Tax Credit, the Earned Income Tax Credit, and the American Opportunity Tax Credit for college tuition. It would also allow businesses to deduct 100 percent of investments in plant and equipment in the first year, and extend for two years the state and local sales tax deduction. In addition the bill would “patch” the AMT, extending Alternative Minimum Tax relief for two years to prevent the AMT from ensnaring millions more taxpayers. The bill also includes extensions of the Research and Experimentation Credit for businesses.

It also would extend a variety of popular tax breaks, including the ability of schoolteachers to expense purchases of school supplies. The bill also includes energy tax breaks for biodiesel fuel, ethanol and renewable energy sources.

During the debate earlier in the evening, many of the lawmakers expressed misgivings about the bill and its effect on the deficit, but said they felt the need to pass the legislation outweighed those concerns. Others could not bring themselves to support the bill and denounced the continuation of the Bush tax cuts for the wealthy, especially the exemption on estate taxes for inheritances below $5 million for individuals and $10 million for couples.

“I salute President Obama for getting in the bill what is in there,” said House Speaker Nancy Pelosi, D-Calif. “I am sorry for the price that has to be paid by our children and our grandchildren to the Chinese government to pay for the increase in the deficit that the Republicans insisted upon.”

Rep. Dave Camp, R-Mich., who is expected to chair the tax-writing House Ways and Means Committee in January when Republicans become the majority party in  the House, complained that Democrats had not settled the question of the Bush tax cuts extension prior to the midterm elections.

“There is some explaining to do,” he said. “Why wasn’t this issue dealt with before the election? Why didn’t the majority bring a bill to the floor before the election? Now, as Americans face these tax increases, here we are just a few short days before the end of the year, and now because there is a bipartisan compromise that incidentally passed the Senate by 81-19 there is a recognition that this is no time to be playing games with our economy. The failure to block these tax increases would be a direct hit to families and small businesses and employers and further delay our economic recovery, and for those reasons I support this.”

Here is a sampling of other comments by lawmakers during the debate:

Rep. Danny Davis, D-Ill.: “I was at a meeting of CEDA, the organization in Chicago and Cook County that services low-income families, trying to figure out how to help my constituents get their homes heated because it might be snowing in Washington, but it’s cold in Chicago. The telephone rings and somebody said, ‘Could you take a call from the President?’ I said, ‘Which President?’ ‘Well, the President of the United States.’ I said, ‘Of course I’ll take it.’ I got on the phone and the President said to me, ‘Danny, we need to pass this bill and we need to pass it because, even though it’s cold, it’s going to get colder, and there are going to be people who don’t have any unemployment compensation benefits, and they can’t pay their heating bill. There are going to be people who want to send their kids to college, and without the tax credits for college tuition, they won’t be able to pay the tuition.’ I said, ‘Yeah, but Mr. President, what about those people way up at the top that’s getting all of this money?’ He said, ‘Well, there might be an opportunity to reduce that,’ and I’m looking forward to voting on the Pomeroy amendment, so that we can reduce some of that money that they’re going to keep in their pocket, put it into the Treasury so that we can help the poor people in Chicago who are cold and don’t have any heat.”

Rep. Linda Sanchez, D-Calif.: “Unemployed Americans desperately need their benefits extended, and I proudly voted to do so every time I’ve had the chance. This bill also contains tax cuts for hardworking families, tax cuts I voted for two weeks ago on this very floor.  But this bill holds these good policies hostage to a giant handout to those who need help the least. It’s political bullying at its very worst, an affront to American working families waged by Republicans whose irresponsible decisions got us into this mess in the first place. This bill contains a radical change to the inheritance tax that will concentrate wealth and power in even fewer hands than it is now. In a country that prides itself on being a meritocracy and not an aristocracy, such a giveaway is irrational. It completely neuters our ability to invest in people and infrastructure. This bill contains tax breaks for those who make more than $250,000 a year, breaks that our country can ill afford when teachers are being laid off and libraries are being closed, when those who have been unemployed for the longest are losing their safety net and young men and women are still being asked to serve and die in Iraq and Afghanistan. The payroll tax cut is another bad idea. Not only does it make Social Security less secure, many public servants including California teachers won’t see any tax cut at all. Overall, this bill adds over a trillion dollars to the deficit while doing very, very little to create jobs, spur economic growth or invest in America’s future.”

Rep. Bobby Scott, D-Va.: “The two-year cost of the bill is about the same as the 10-year cost of the health care reform bill, and at least we paid for that. We need to make tough, unpopular choices to balance the budget. Obviously letting tax cuts expire would be unpopular, but when we ever decide to get serious about the deficit, we will find that the alternatives are even more unpopular because after today’s vote, the choices will necessarily include cuts to Social Security, Medicare, education and other popular programs. If we don’t have the political will to end the disastrous Bush-era tax cuts now, we certainly won’t have that political will during the middle of a presidential election. The job creation in this bill is paltry. It’s around $400,000 a job. We can do better than that.”

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