CORRECTED – WRAPUP 3-Obama calls in Clinton to help with tax fight

* Clinton to Democrats: This is as good as it will get

* Senator Sanders protests in six-hour marathon

* Obama says next step is to simplify tax code
(Corrects Sanders’ political affiliation, paragraph 6)

By Caren Bohan and Andy Sullivan

WASHINGTON, Dec 10 (BestGrowthStock) – U.S. President Barack Obama
on Friday called on a battle-scarred dealmaker, former
President Bill Clinton, to help convince reluctant Democrats to
back a compromise tax plan before rates rise for most Americans
in January.

As Democrats in the House of Representatives sought to
toughen provisions targeted at the wealthiest, Clinton urged
them to pass the plan in its current form before they hand over
control of the chamber to Republicans next month.

“This is a much, much better agreement than would be
reached were we to wait until January,” Clinton said at a White
House news conference with Obama by his side.

Democrats have closely studied Clinton’s 1990s tenure in
the White House as they seek to recover from a devastating
defeat in November’s congressional elections. The voluble
former president, legendary for his political skills, remained
at the podium even after Obama left for a Christmas party.

Obama’s $856 billion tax deal, struck with the Republicans
who will soon wield greater clout in Washington, is viewed with
alarm by many Democrats who worry that he will give away too
much at the bargaining table in the next two years.

“We have got to do a lot better than this agreement
provides,” said independent Senator Bernie Sanders, who
inveighed against the deal on the Senate floor for more than
six hours on Friday without a bathroom break or a chance to sit
down. Sanders generally votes with the Democrats.

The Senate is expected to pass the bill as soon as Tuesday,
but its prospects are less certain in the House. Democrats
there want to toughen estate-tax provisions that they say are
too generous for the wealthiest Americans, but it will be
difficult for them to see those changes become law.

Senate Republicans, who have scuttled a wide range of
Democratic initiatives this year, will not accept any changes
to the estate tax provision, an aide said.

Obama said Congress should simplify the byzantine U.S. tax
code next year, but the battle on Capitol Hill illustrated the
difficulties involved even in keeping the current system in

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


Full coverage of tax and deficit debates [ID:nN06200548]

Government debt graphic


Along with the estate tax, the compromise would keep lower
income tax rates in place for another two years for all tax
brackets. Democrats had hoped to allow tax rates to rise for
the wealthiest 2 percent of U.S. households to avoid increasing
the country’s record-high debt level.

The measure would also continue unemployment benefits and
other tax breaks aimed at lower-income families and extend a
wide array of subsidies and breaks for businesses and renewable
energy. It does not include the subsidized Build America bonds
that have been popular with state and local governments.

Economists say the package, especially a payroll tax cut
for workers, could boost the sluggish economy at a time when
Congress has no appetite for stimulus spending.
Its cost would exceed even the $814 billion stimulus package
passed in 2009 to fight the worst recession since the 1930s.

Pacific Investment Management Co, which runs the world’s
biggest bond fund, said the plan would boost U.S. economic
growth by one percentage point next year, to between 3 percent
to 3.5 percent in the fourth quarter of 2011. [nN09274613]

The plan prompted a two-day sell-off of U.S. Treasury bonds
earlier in the week as investors worried about its impact on
the country’s finances. By Friday, the market was focused on
other economic data.


Democrats are fuming that Obama agreed to Republican
demands that the estate tax be lowered from 45 percent to 35
percent. The president also agreed to boost the exemption to
estates of $5 million or less from $3.5 million, meaning fewer
estates will be taxed.

Along with a tougher estate tax, some House Democrats also
hope to include support for Build America bonds in the bill.
But even if those provisions are included many may still vote
against the bill, a Democratic aide said. The bill will need
substantial Republican support to pass, the aide said.

Only about 40 of the 255 House Democrats would be needed to
win passage, if all of the 179 House Republicans back it.

As lawmakers braced for the legislative endgame, Obama said
Congress should next consider streamlining the multilayered tax
code to lower rates while eliminating tax breaks for favored
groups. Any effort would be challenging but if successful could
set the stage for more robust growth, he said in an interview
with National Public Radio.

“We’ve got to start that conversation next year. I think we
can get some broad bipartisan agreement that it needs to be
done. But it’s going to require a lot of hard work to actually
make it happen,” he said.

Tax reform is an idea backed by many in the business
community who say the current corporate tax structure is so
complex that it impedes investment and puts American firms at a

A presidential budget commission last week said the United
States could lower tax rates and raise more revenue by getting
rid of specialized deductions and other tax breaks.

But a broad rewrite would set off a frantic lobbying battle
on Capitol Hill as every industry and interest group would
scramble to protect tax breaks or carve out new advantages.

(Additional reporting by Thomas Ferraro, Richard Cowan, Kim
Dixon, Jeff Mason and Patricia Zengerle in Washington, and
Jennifer Ablan in New York; Editing by Jackie Frank)

CORRECTED – WRAPUP 3-Obama calls in Clinton to help with tax fight