To reach an agreement considering keeping tax rates at their current level through next year, House Republicans used one of their last votes before recessing for most of August to approve politically symbolic legislation that Obama has previously vowed to veto.
The move was aimed to demonstrate the contrast between the GOP point of on taxes and the one pushed by President Obama and congressional Democrats.
The Senate, which mainly composed of Democrats, has already decided on the measure that would raise income tax rates to above $200,000 for individuals and $250,000 for couples – a move that would affect the top 2% of earners.
As The Los Angeles Times suggests, if no compromise is met, the divide between Republicans and Democrats on taxes is expected to fuel the presidential campaigns.
The current tax rates, first approved under the George W. Bush administration, are due to expire at the end of this year. According to the legislation, if Congress fails to agree on taxes by Dec. 31, they will rise automatically.
“We stand for no tax increases,” explained freshman Rep. Tom Reed (R-N.Y.). Republicans advocate the rise of taxes for millions of low-income households.
The target can be met by ending tax breaks for families with children that were approved three years ago as part of the economic stimulus legislation.
As for Democrats, they argued that Republicans should not hold tax breaks for most Americans hostage for a “bonus” break for upper-income earners.
“We all admire financial success, but when we give away trillions in tax cuts we cannot afford to those who need them the least, it’s the middle class who has to make up the difference,” said Rep. Xavier Becerra of Los Angeles, a top Democrat in the House.
The Democratic plan failed 170-257, with 19 Democrats voting against it while the Republican plan was approved by 171 members out of 256. One Republican, Representative Timothy V. Johnson of Illinois, who is retiring, opposed it.
“It’s time to put the rhetoric aside,” said Speaker John A. Boehner of Ohio. “It’s time to put the politics aside. I know we’re in an election year, but my goodness, raising taxes at this point in this economy is a very big mistake.”
Last week the Senate approved proposal, and top income tax rates are expected to go up, from 33% and 35% now to 35% and 39.6%.
Rates for capital gains and dividends would also rise, to 20%, while the estate tax would revert to its 2001 level of 55%, up from 35% today.
According to the reports, Democrats would continue the 2009 tax breaks, including credits for child care and college costs, for another year.
It was estimated that the approved bill would keep the 33% and 35% rates in place, as well as the capital gains and dividend would at 15% and eliminate the additional tax credits approved in the 2009 Obama bill.
The White House has already counted that the approved plan would cost $1 trillion more over the decade than the Democratic plan, prompting the president’s veto threat over the GOP approach.