WASHINGTON — Defying US President Barack Obama, the Republican-held House voted to extend tax cuts for all Americans, framing a partisan divide over an issue that will not be resolved before November's election.
House lawmakers on Wednesday rejected a substitute Democratic plan that would have let taxes rise for top earners, and then voted 256 to 171 to extend a package of Bush-era tax cuts for everyone for another year.
The move collides with a recently approved Senate bill that would extend the tax breaks for families making under $250,000 a year -- about 98 percent of Americans. Obama has threatened to veto a bill that also extends the cuts for those making more than that threshold.
But House Republicans said raising taxes on job creators like small businesses in a sluggish economy that is failing to grow enough to get the jobless rate below eight percent is not the answer.
The dueling bills are seen as little more than political positioning three months before the election, in which Obama is seeking re-election.
Lawmakers will then be forced into a political showdown over how to avert at least some of the tax hikes that are looming at the end of the year, when the existing rates expire.
"America is at a crossroads... and the question is which path will our country take?" Congressman Dave Camp, chairman of the House Ways and Means Committee, said on the House floor.
"The Democrats' path includes tax hikes that will cause small businesses to lose 700,000 jobs," he said, citing a corporate report hailed by Republicans but panned by Democrats.
The Republican plan, he said, would lead to the creation of up to one million jobs in the first year alone.
Congresswoman Diane Black characterized the bill passed by her fellow Republicans as nothing less than a bid to "keep the American dream alive."
But Democrats don't see it that way. The party's House leader Nancy Pelosi warned that the bill would "greatly increase the deficit" and raise taxes for some 25 million middle-income Americans by an average of $1,000.
She said the Democratic plan to allow tax breaks to expire on rich Americans, combined with an end to tax cuts for the wealthiest of estates, would raise nearly $1 trillion, which would go far towards the $1.2 trillion needed in order to avoid severe automatic spending cuts to domestic and military programs.
The automatic cuts, written into 2011 legislation as part of the deal in Congress to raise the debt limit, are among several pieces of unfinished financial business, including the Bush-era tax cuts, that are described as the "fiscal cliff" facing the nation if Congress does not act.
House Speaker John Boehner wrote a letter Wednesday to Senate Majority Leader Harry Reid offering to reconvene the House in August, during the summer recess, "should the Senate act on these priorities," but such a move was unlikely.
In a statement, the White House said the House bill would punish working families.
"The 114 million middle-class families that stand to see their income taxes increase on January 1 by an average of $1,600 should not be held hostage to the tax cuts for the highest-income two percent provided by H.R. 8," it said.
The vote came on the same day a Washington think tank said Republican White House hopeful Mitt Romney's plan to cut taxes and get the economy back on track would hurt the poor and depress revenues.
His proposed plan, which involves cutting income tax rates by 20 percent and slashing the corporate tax rate, would mean people earning over $1 million a year would get an average tax cut of around $175,000, while those earning less than $30,000 would get an increase of around $130, the Brookings Institution said.
The House is set to vote Thursday on a tax reform bill which, if enacted, would see the tax code simplified, individual tax rates reduced to just two levels, and corporate tax rates slashed.
Obama has threatened to veto that bill too, with the White House saying the legislation would "carry a price tag of about $5 trillion over 10 years," which could "explode the deficit."