President Obama wrecked a $440 billion tax cut deal between Senate Democrats and House Republicans Tuesday just as negotiations were wrapping up.
More than 50 expired and expiring tax breaks — including a cherished research and development tax credit for businesses, charitable deductions and an earned income credit for low income workers — must be extended by Congress by the end of the year. Otherwise, businesses and individuals won't be able to claim them on this year's tax returns.
Republicans want to make several of the cuts permanent, but Democrats argue permanent cuts are too expensive and would prefer to extend all of them for another two years. (RELATED: Congress Set To Expend More Than 50 Tax Breaks)
Senate Majority Leader Harry Reid and Republican Rep. Dave Camp, Ways and Means Committee chair, were about to strike a compromise Tuesday that would have made ten of the cuts permanent and extended the rest. But President Obama intervened and threatened a veto, saying the deal favored corporations at the expense of the working class.
Most of the proposed permanent cuts would have benefitted businesses, although Republicans threw in a few favored by Democrats, including a deduction for state and local sales tax favored by Reid, a break for commuters and a break that helps students pay college tuition, reported the Wall Street Journal.
Two of the Democrats favorite cuts were not included because of Obama's recent executive order granting amnesty to an estimated five million illegal immigrants, reported The New York Times. Republicans announced Friday they would not make the child tax credit or the earned income credit permanent, because they could be claimed by the newly legal immigrants.
The deal also would have phased out a wind energy credit hated by Republicans.
The White House was "livid" over the deal, Democratic aides told The Hill. "The president has consistently stated his opposition to giving hundreds of billions of dollars of tax cuts primarily geared to corporations while leaving middle class families and those struggling to get into the middle class behind," White House Council of Economic Advisers Chairman Jason Furman told The New York Times.
The president's veto threat angered Republican aides, who told The New York Times he's reversing prior support for some of the cuts, such as the research and development tax credit for businesses.
Congress now has until December 11, when it's scheduled to wrap up for the year, to come up with a new deal. One option is for Republicans to push through a very short term extension of all of the cuts through 2014, and then revisit the issue when they've gained the majority.Facebook, Google Plus, & Twitter. You can also get Freedom Outpost delivered to your Amazon Kindle device here.