House Democrats Balk Over Estate Tax as Senate Moves to Approve Tax Deal

A majority of House Democrats will likely oppose the Senate compromise on a tax bill expected to go to the House later this week, but Majority Leader Steny Hoyer said Monday he thinks it will ultimately pass.

In a speech to the National Press Club, the Maryland Democrat said the Senate legislation may have to be upended when it reaches the House, particularly over the estate tax, which would force changes to be sent back to the Senate. 

That leaves open the idea the House may start another volley in the ping-pong match, which could send Republicans packing since they have said they will accept no changes to the deal. 

"I simply do not believe that the deep debt that comes from Republican upper-income and estate tax cuts is worth their minimal impact on job creation," Hoyer said, noting that the deal negotiated by Republicans and President Obama "is giving Democrats such pause."

But "having said that, I believe that action is necessary and compromise was inevitable," Hoyer noted.

The Senate is holding a test vote on Monday afternoon to test the $858 billion package, a mix of $545 billion in extended tax rates and $313 billion in new spending. Passage would ready the legislation for a full Senate vote as early as Tuesday. 

Included in the bill are provisions to renew jobless benefits for another 13 months, a one-year "payroll tax holiday" that would cut 2 percent from the sum employees pay into Social Security and an extension of current rates for all income levels. 

Without the legislation, taxes will rise for everyone beginning Jan. 1. But House Democrats are balking that the bill would put the estate tax at 35 percent for estates worth $5 million rather than 45 percent on estates worth $3.5 million. Without the bill, the estate tax will rise to 55 percent on estates worth more than $1 million. Estate taxes were zeroed out in 2010 as a result of Bush-era cuts. 

The No. 2 Senate Democrat, Dick Durbin of Illinois, said a "good cross-section" of senators in his party are ready to accept the deal. Sen. Robert Menendez, D-N.J., called the deal "crucial for delivering relief to middle class families and the workers hit hardest by this economy."

In other business, Hoyer said he, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi are all looking to adjourn by Friday. The Senate must still approve a "continuing resolution," legislation that was approved by the House last week to keep government operating for the rest of the fiscal year ending Sept. 30. The current CR expires at the end of the week.