With negotiators nearing an accord on permanent tax breaks for businesses worth $440 billion over 10 years, US President Barack Obama rallied Democratic opposition on Tuesday and promised a veto.
“The president would veto the proposed deal because it would provide permanent tax breaks to help well-connected corporations while neglecting working families,” said Jennifer Friedman, a White House spokeswoman.
The deal, negotiated by House Republicans and aides to senator Harry Reid of Nevada, the outgoing majority leader, showed how much power has shifted since the Republican election victories this month. The negotiations fractured Democrats, and separated the Obama administration from Reid.
But Obama’s threat showed that he could still wield his authority as well. White House officials said the package, intended to avoid letting a host of politically popular tax breaks expire at the end of the year, is too heavily tilted toward corporations and will have deep repercussions for budget and tax negotiations far into the future.
A veto would be the third and by far the most significant of Obama’s presidency. His threat sent negotiators back to the table to see if Republicans could add measures that would win liberal support, especially a permanently expanded child tax credit for the working poor.
“It’s somewhat ironic they’re willing to just proceed here, unpaid for, leave the middle class behind and include a lot of things that I think wouldn’t benefit our economy,” said Jason Furman, chairman of the White House Council of Economic Advisers. Advocates of the deal in both parties said the emerging accord would lock in tax breaks that have been passed in short-term increments, year after year. Doing so would give businesses more certainty about making investments, they said, while extending tax benefits that already have broad bipartisan support.
The stand-off has set up a high-stakes game of chicken. Some 55 tax breaks for businesses and individuals expired last year, and if they are not revived retroactively by December 31, taxpayers will not be able to claim them for the current tax year. Republicans say Congress might pass a one-year retroactive measure that would simply start the fight all over again in January, when they control the Senate and their numbers are fortified in the House.
The potential repercussions of the deal are broad. Republicans taking over the House and Senate budget committees have vowed to pass plans that bring the federal budget into balance in 10 years without raising taxes or cutting the defence budget. If the tax deal is passed, that will mean those budget plans will have to cut deeper into domestic spending.