By Erik Wasson and Russell Berman - 12/19/12 01:20 AM EST
Speaker John Boehner (R-Ohio) told House Republicans on Tuesday he will move to a “Plan B” on the fiscal cliff by having the House vote on legislation to extend tax rates on annual income under $1 million.
The bill would allow tax rates on annual income above $1 million to rise from 35 percent to 39.6 percent, but make permanent lower rates on income below that threshold, Boehner’s office said.
The move sets up a momentous challenge for the Speaker, as he seeks to build support for legislation that only months ago House Republicans considered an unacceptable tax increase.
The Speaker said talks were ongoing, but differences remain over spending cuts, entitlement reforms, new spending measures demanded by Obama and the president’s request for a hike to the debt limit.
Boehner informed the president of his plan in a phone call Monday night and detailed it to his conference in two closed-door meetings on Tuesday. Obama dispatched his chief congressional lobbyist, Rob Nabors, to brief House and Senate Democrats on the negotiations.
Republican aides stressed that the talks will continue, but lawmakers said Boehner’s bill could come to a vote as early as Thursday.
“For weeks, Senate Republicans — and a growing number of you — have been pushing for us to pivot to a ‘Plan B.’ I think there’s a better way. But the White House just can’t seem to bring itself to agree to a ‘balanced’ approach, and time is running short,” Boehner said in the private House GOP meeting, according to prepared remarks provided by his office.
“At the same time we’re moving on ‘Plan B,’ we’re leaving the door wide open for something better. And I have been clear about that with the president. Plan B is Plan B for a reason. It’s a less-than-ideal outcome. I’ve always believed we can do better,” he said.
House GOP leaders told lawmakers later on Tuesday there would be two floor votes, aides said. The first would provide a one-year extension on rates for family income up to $250,000, mirroring the original Democratic position. The second would be Boehner’s proposal with the $1 million threshold, with additional provisions for the Alternative Minimum Tax, the estate tax and investment taxes.
House Republicans said they expected that the Senate would amend any bill the House passed and send it back to the lower chamber, meaning the House bill could serve as a legislative vehicle for a final agreement.
But the White House and Senate Majority Leader Harry Reid (D-Nev.) swiftly rejected Boehner’s move, and House Democrats said they would whip their members to oppose it, challenging the Speaker to round up 218 votes to pass a tax increase on his own.
“Today, House Republicans have threatened to abandon serious negotiations,” Reid said. “Boehner’s proposal will not pass the Senate.”
With Boehner’s latest proposal, the post-election shift in bargaining positions has come full circle: Republicans are now the ones rhetorically pleading to protect all but the wealthiest taxpayers.
In the hours after Boehner pitched his “Plan B” to the House GOP, his aides sought to corner Democrats by pointing out that top Democrats, including House Minority Leader Nancy Pelosi (Calif.) and Sen. Charles Schumer (N.Y.), have previously expressed support for extending tax rates.
But a Schumer spokesman said things changed with the reelection of President Obama, who campaigned on a pledge to raise tax rates on annual income above $250,000 but moved to $400,000 this week.
“Republicans should’ve taken Sen. Schumer’s offer two years ago when they had the chance,” Schumer spokesman Brian Fallon said. “We’ve had an election on the president’s tax plan, the president won, and Republicans can’t turn the clock back.”
Boehner told members that with time dwindling before the Bush-era tax rates on most households expire at the end of the year, the House needed a backup plan. Economists fear the tax hikes, combined with spending cuts set for January, could push the economy into a recession.
In a press conference after the meeting, Boehner said he remained hopeful he could reach a broader deal with the president rather than rely on his alternative measure.
“What we’ve offered meets the definition of balanced, but the president is not there yet,” Boehner said.
Inside the meeting, however, the Speaker stopped short of predicting that a deal with the president was likely.
“He would love to have no ‘Plan B,’ but he thought it was a responsible thing to have a ‘Plan B’ because he couldn’t say that discussions at the White House were even 50-50 at this moment,” Rep. Steven LaTourette (R-Ohio) said of Boehner.
The Speaker has made a similar move before in late-stage negotiations with the president. In 2011, as the nation approached the debt ceiling with no deal in sight, Boehner pushed a Republican proposal through the House floor in a bid to gain leverage with Democrats.
But this would be the first time Boehner would ask his members to vote for a tax increase, and it was unclear whether Republican leaders could even pass their bill through the House without Democratic support.
“It’d be a bit of a stretch,” Rep. Phil Gingrey (R-Ga.) said. “Good whip team. I just don’t know for sure.” Gingrey said he was undecided on how he would vote.
The conference meeting was a sobering reality check for House Republicans who have opposed tax rate hikes at every turn, and many lawmakers walked grimly past reporters without commenting.
“We’re having a frank conversation about where we stand, what are the realities of our negotiating position,” freshman Rep. Sean Duffy (R-Wis.) said. “There wasn’t applause. There wasn’t outrage. People are just absorbing, you know, what the Speaker is saying.”
Other members described a spirited discussion in the room and division within the conference about how to proceed.
“The Speaker laid out the plan in a very compelling way, and there’s just a lot of hard thinking going on,” conservative Rep. Trent Franks (R-Ariz.) said. “I’m going to let the Speaker have as much latitude as he needs to try to negotiate with this president.”
Several conservatives opposed to tax hikes said they would at least consider Boehner’s proposal, while some rejected it outright.
“I’m a ‘Hell, no!’ ” Rep. Raul Labrador (R-Idaho) said. “There are a lot of bad things in this bill.”
— Bernie Becker, Peter Schroeder, Molly K. Hooper and Mike Lillis contributed.