President Barack Obama’s bipartisan tax plan was on its way to passing its first test in Congress yesterday, but a major Wall Street firm warned that damage to America’s strained finances would outweigh any short-term economic boost.
The $858 billion package, which would keep lowered income-tax rates from expiring at the end of the year, passed a procedural hurdle and will now go to full vote in the chamber today or tomorrow.
The bill also extends unemployment insurance benefits, cuts payroll taxes and affects the estate tax.
Both chambers of Congress could approve the bill by the end of the week, despite complaints from many Democrats that Obama has given away too much to the Republicans.
“I think we’ll pass a bill, as opposed to simply not passing anything,” House of Representatives Democratic leader Steny Hoyer said.
Many economists say the deal could boost the sluggish economy, in part because of the payroll tax credit and extension of jobless benefits. They estimate the tax package could lift economic growth next year by up to a full percentage point, perhaps pushing it above 4 percent.
But Moody’s Investors Service warned it could move a step closer to cutting the United States’ top-notch triple-A bond rating in the next two years if the package becomes law.