Obama signs massive tax bill, hails deal with GOP

Image: The U.S. Capitol Dome is lit after the first significant snowfall of the season as the House of Representatives worked late into the evening to pass the $858 billion package of renewed tax cuts and more unemployment benefits in Washington
The Capitol is lit after the first significant snowfall of the season as the House of Representatives worked late into the evening to pass the $858 billion package of renewed tax cuts and more unemployment benefits in Washington on Thursday. Hyungwon Kang / Reuters
/ Source: NBC News and news services

While liberals seethed, President Barack Obama saluted a new spirit of political compromise Friday as he signed into law a huge tax bill extending cuts for the rich — benefits he had steadfastly denounced — along with billions of dollars in help for the middle class and jobless workers.

"It's a good deal for the American people; this is progress and that's what they sent us here to achieve," Obama said as a rare bipartisan assembly of lawmakers looked on.

The package retains Bush-era tax rates for all taxpayers, from the working poor to the wealthiest. It also offers 13 months of extended benefits to the unemployed and attempts to stimulate the economy with a Social Security payroll tax cut for all workers.

At a cost of $858 billion over two years, the deal contains provisions dear to both Democrats and Republicans. It represents the most money that Obama was likely to have been able to dedicate over the next year to a slowly recovering economy, at the same time increasing the federal deficit at a time when the country is growing increasingly anxious about the red ink.

"This is real money that is going to make a real difference in people's lives," the president said.

He conceded, however, that the White House and Congress face a difficult challenge when it comes to controlling the deficit and tackling the nation's debt.

"In some ways this was easier than some of the tougher choices we're going to have to make next year," he said.

'Good for growth'
Sweeping tax cuts enacted when George W. Bush was president are scheduled to expire Jan. 1 — a little more than two weeks away. The bill extends them for two years, placing the issue squarely in the middle of the next presidential election, in 2012.

The extended tax cuts include lower rates for the rich, the middle class and the working poor, a $1,000-per-child tax credit, tax breaks for college students and lower taxes on capital gains and dividends. The bill also extends through 2011, a series of business tax breaks designed to encourage investment that expired at the end of 2009.

Workers' Social Security taxes would be cut by nearly a third, going from 6.2 percent to 4.2 percent, for 2011. A worker making $50,000 in wages would save $1,000; one making $100,000 would save $2,000.

"This legislation is good for growth, good for jobs, good for working and middle class families, and good for businesses looking to invest and expand their work force," said Treasury Secretary Timothy Geithner.

Some Democrats complained that the package is too generous to the wealthy; Republicans complained that it doesn't make all the tax cuts permanent.

Rep. Ginny Brown-Waite, R-Fla., called it "a bipartisan moment of clarity."

The bill's cost, $858 billion, would be added to the deficit, a sore spot among budget hawks in both parties.

"I know that we are going to borrow every nickel in this bill," Hoyer lamented.

At the insistence of Republicans, the plan includes an estate tax that would allow the first $10 million of a couple's estate to pass to heirs without taxation. The balance would be subject to a 35 percent tax rate.

Many House Democrats wanted a higher estate tax, one that would allow couples to pass only $7 million tax-free, taxing anything above that amount at a 45 percent rate. They argued that the higher estate tax would affect only 6,600 of the wealthiest estates in 2011 and would save $23 billion over two years.

House Speaker Nancy Pelosi, D-Calif., called the estate tax the "most egregious provision" in the bill and held a vote that would have imposed the higher estate tax. It failed, 194-233. No Pelosi vote
On the bill's final vote, House Speaker Nancy Pelosi, D-Calif., did not vote; House GOP leader John Boehner, R-Ohio, and Majority Leader Steny Hoyer, D-Md., voted for the bill, and Majority Whip James Clyburn, D-SC, voted against the bill, NBC News reported.

Boehner, after the vote, called the bill's passage "critically important."

"Stopping all the tax hikes is a good first step in our efforts to reduce the uncertainty family-owned small businesses are facing, but much more needs to be done, including cutting spending, permanently eliminating the threat of job-killing tax hikes, and repealing the job-killing health care law," Boehner, House speaker-designate, said in a prepared statement.

House Republicans who will move into powerful posts when the GOP takes control in January urged passage of the bill.

Rep. Eric Cantor of Virginia, in line to become majority leader, said the measure, while not perfect, marked a "first step" toward economic recovery.

Largely marginalized in the negotiations leading to the bill, Democrats emphasized their unhappiness with Obama.

"We stand today with only one choice: Pay the ransom now or pay more ransom later," said Rep. Brad Sherman of California. "This is not a place Democrats want to be. But, ultimately, it is better to pay the ransom today than to watch the president pay even more, and I think he'd be willing to pay a bit more next month."