House passes 'chicken crap,' setting up a game of chicken

Here's the House vote on the Democrats' tax bill, which passed this afternoon largely along party lines. The bill keeps income tax rates where they are for those with incomes below $250,000 but allows them to rise to 39.8 percent on marginal income for individuals and small businesses above that line.

You'll notice that three Republicans voted for the Democratic bill, but not the ones you might expect. Reps. Ron Paul, R-Texas, Jim Duncan, R-Tenn., and Walter Jones, R-N.C., a somewhat rebellious but small caucus perhaps easiest to lump together as “paleo-libertarians,” were the ones who voted “aye.” Paul's press office offered this comment:

He would have preferred a bill that eliminated the sunset [of tax cuts] for all taxpayers, but at least today’s bill prevents a January tax hike for many taxpayers.

This House vote is really not too surprising. The big question is the Senate, where Republicans have leverage to prevent anyone's taxes from going up.

House Minority Leader John Boehner has referred to the Democrats' maneuver in bringing up the bill as “chicken crap,” but it might be described more accurately as a game of chicken, which Democrats are bound to lose. If no bill passes, Republicans will simply pass a tax bill in through the House early next year, which would apply to all 2011 income. Senate Democrats and President Obama will then have to decide whether to assent, or to let everyone's tax rates go up, including low-income Americans.

That's why an agreement is likely before the year's end, although the White House statement on today's vote suggests that there's no agreement yet:

“The President continues to believe that extending middle class tax cuts is the most important thing we can do for our economy right now and he applauds the House for passing a permanent extension.  But, because Republicans have made it clear that they won’t pass a middle class extension without also extending tax cuts for the wealthy, the President has asked Director Lew and Secretary Geithner to work with Congress to find a way forward.  Those discussions started just yesterday and are continuing this afternoon.  The talks are ongoing and productive, but any reports that we are near a deal in the tax cuts negotiations are inaccurate and premature.”

Democrats probably could have gotten away with this if they'd voted before leaving town for the election, but it's just too late now. Their posturing has made it impossible for businesses to plan their employee withholding in a timely manner. If millions of Americans will see huge chunks of their income taken out of their first paychecks in January, they'll all exclaim, “Chicken Crap!”

Beltway ConfidentialUS

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