WASHINGTON — President Obama promised Tuesday to veto an emerging package of permanent tax breaks for businesses, mustering Democratic opposition and setting back negotiators who were nearing accord on a suite of tax cuts worth $440 billion over 10 years.
“The president would veto the proposed deal because it would provide permanent tax breaks to help well-connected corporations while neglecting working families,” said Jennifer Friedman, a White House spokeswoman.
The deal, negotiated by House Republicans and aides to Senator Harry Reid of Nevada, the majority leader, showed how much power has shifted since the Republican election victories early this month. White House officials said the package was heavily tilted toward corporations and will have deep repercussions for budget and tax negotiations far into the future.
But it also showed how Mr. Obama still can wield his authority. A veto would be the third and by far the most significant of Mr. Obama’s presidency. His threat sent negotiators back to the table to see if Republicans could add measures that would win liberal support, especially a permanently expanded child tax credit for the working poor.
Advocates in both parties said the emerging accord will lock in tax breaks that otherwise are passed in short-term increments, year after year. That will give the economy more certainty while extending businesses tax benefits that already have broad bipartisan support. And Senate Democrats said they cut the best deal possible before Republicans take over next year.
But Mr. Obama and White House Chief of Staff Denis R. McDonough personally stepped in, launching a furious round of calling Tuesday afternoon to see if they could muster enough Democratic support to sustain a veto.
The tax measure would make permanent 10 provisions, including an expanded research and development tax credit, which businesses have wanted to be made permanent for years; a measure allowing small businesses to deduct virtually any investment; the deduction for state and local sales taxes, the American Opportunity Tax Credit for college costs; deductions for employer-provided mass transit and parking benefits; and four different breaks for corporate and charitable giving.
Smaller measures already passed by the Senate Finance Committee would be extended for one year, and retroactively for the current tax year, from tax breaks for car-racing tracks to benefits for race horse owners.
The tax credit for wind power would phase out and end after 2017.
Left off were the two tax breaks most valued by liberal Democrats: a permanently expanded earned-income credit and child tax credit for the working poor.
The repercussions for the deal are broad. Republicans taking over the House and Senate budget committees have vowed to pass plans that bring the federal budget into balance in 10 years without raising taxes. If the tax deal is approved by the outgoing Congress, those budget plans will have to cut deeper into government spending.
Republicans also have vowed to overhaul the tax code with a system that brings in the same amount of revenue. That target would be $440 billion lower over the next decade.
“An extender package that makes permanent expiring business provisions without addressing tax credits for working families is the wrong approach, at the expense of middle-class families,” Treasury Secretary Jacob J. Lew said of the apparent agreement. “Any deal on tax extenders must ensure that the economic benefits are broadly shared.”
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