Congressman Geoff Davis : Serving Kentucky's Fourth District

Washington, Dec 3 - The U.S. House passed Democrats' plan to extend Bush-era tax cuts for middle-income taxpayers over the objections of Republicans who say it would harm the economy by raising taxes for people with higher incomes.

The vote was 234-188 for the measure, which would permanently extend lower rates and expanded tax credits on the first $200,000 of individuals' income and the first $250,000 for married couples. Taxpayers with higher annual income would face increased taxes on wages, capital gains and dividends. Republicans say they plan to block the measure in the Senate.

"It's time that this country acted sanely," California Democrat Xavier Becerra said in support of the measure during debate before today's vote. "It's time that we focused our attention on the middle class."

Republicans derided the measure as political theater, and House Minority Leader John Boehner of Ohio said the vote was "chicken crap."

"We're 23 months from the next election and the political games have already started," said Boehner, who is set to become House speaker in January.

Under current law, the tax cuts enacted in 2001 and 2003 are slated to expire Dec. 31.

Talks Continue

Separately, bipartisan negotiators from the White House and both chambers of Congress continued their talks on tax-cut extensions. President Barack Obama told a group of newly elected governors that he's "confident" tax cuts for the middle class will be passed this month, though he said there may be some "posturing."

House Democrats said the bill would ensure that taxes wouldn't increase for middle-income taxpayers next year. They said Republicans were gambling with middle-income tax cuts to ensure that upper-income taxpayers also benefit.

"The time has come," said Ways and Means Committee Chairman Sander Levin, a Michigan Democrat. "The smokescreen is now being lifted by this bill. You have a chance to stand up or back down on tax cuts for the middle-income families of this country."

Republicans said allowing taxes to increase for higher- income taxpayers who report business income on individual returns would hamper job creation.

Geoff Davis, a Kentucky Republican, said business owners would impose pay cuts and layoffs if tax rates rise. "These are serious and real decisions that will face our job creators on Jan. 1," he said. "At a time when our economy is trying to recover, why would we want to raise taxes on anyone?"

Deficit Worries

Some House Democrats voted against the bill. A few echoed Republican arguments that any tax increase would cause economic damage. Others warned about the $1.5 trillion increase in the federal budget deficit that would be created over the next decade.

The House legislation would preserve the 10, 25, 28, and 33 percent rates for the income thresholds of $200,000 and $250,000.

It would retain the 15 percent tax rate on dividends and capital gains for those who earn up to the threshold. The top income tax rate would increase from 35 percent to 39.6 percent and the top capital-gains rate would rise to 20 percent. People in the highest tax brackets would have their dividends taxed as ordinary income.

The bill also extends for two years an inflation adjustment to the alternative minimum tax, which is slated to impose an additional $66 billion in levies and affect 21 million additional households for this tax year if Congress does not act.