Democrats defy Obama on tax deal

Obama

Angry Democrats in the US House of Representatives on Thursday rejected President Barack Obama's plan to extend low tax rates, as the Senate scheduled a vote on the measure, which has significant Republican support.

The House Democrats' rebellion gives Obama another political headache just over a month after he took a beating in congressional elections, although it will not necessarily derail the tax plan.

In a raucous, closed-door meeting on Capitol Hill, mutinous Democrats chanted: Just say no! as they vowed to overhaul Obama's plan to extend lower tax rates for nearly all Americans, according to lawmakers in the room.

But in the Senate, the plan took a significant step forward as Democrats unveiled legislation late in the day that reflected the terms the White House had reached with Republicans. The Senate bill adds a subsidy for ethanol but leaves out the Build America bonds program popular with Democrats and local governments.

Senate Majority Leader Harry Reid set a vote for Monday.

Obama said on Thursday he expected the agreement would eventually pass.

Here's what I'm confident about, that nobody, Democrat or Republican, wants to see people's paychecks smaller on January 1st because Congress didn't act, Obama told NPR News in an interview due to air on Friday.

Obama's plan would keep lower rates in place for another two years, reduce the estate tax, and extend tax breaks and other benefits aimed at lower-income Americans.

Economists say it could boost the sluggish economy at a time when Congress has no appetite for spending-based stimulus efforts.

Democrats have argued that the revenue that would be lost by extending tax breaks for the wealthiest 2 percent of US households can be put to better use at a time when unemployment is close to 10 percent.

Tax bills will rise in January by an average of $3,000 per household if Congress does not act.

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