Cantor, Republicans signal Obama tax proposal is dead in the water

The Obama administration’s hopes of reaching a tax deal with Republicans that would decouple rates on the rich from the middle class appear dead.

House GOP Whip Eric Cantor (Va.) threw cold water on the proposed plan, which would temporarily extend tax cuts for the wealthy while permanently extending tax cuts for the middle class. “Taxes shouldn't be going up on anybody right now,” Cantor said.

Cantor’s comments Monday evening on Fox News follow similar remarks from Sen. Orrin Hatch (R-Utah), the incoming senior Republican on the Senate’s tax-writing committee. While Hatch expressed an open mind to extending tax cuts past the 2012 election rather than permanently extending the rates, he also ruled out the decoupling proposal.

Hatch said he would be open to a compromise with the White House that would extend all of the Bush tax rates for at least two years.

Republicans do not want to separate the timelines for extending the rates because doing so would make it easier in the future to let tax breaks on upper-income people expire. Cantor on Monday also said the decoupling proposal would send a signal to small businesses that their taxes will rise, which he said would hurt the economy.

“No. I mean, one of the ideas that we've seen floated was this decoupling. ... That is a ... signal right then and there that we're going to raise taxes on small businesses,” Cantor, the soon-to-be majority leader said. “That’s exactly what we don't need right now. What we need is certainty.”

All of the tax cuts are set to expire at the end of the year, and President Obama has made it clear he is willing to compromise to prevent taxes on the middle class from rising. The White House previously supported ending tax breaks for families with income above $250,000 annually, but the administration has made it clear it is willing to deal since the midterm elections, which saw Republicans gain at least 60 House seats.

The tax debate is expected to dominate a lame-duck session of Congress that begins on Nov. 15. Rep. Dave Camp (R-Mich.), the incoming chairman of the House Ways and Means panel, said Monday that “it's a good sign” the White House is open to discussing a deal on the tax cuts, but cautioned that he's not likely change his position.

“I'd like to see them permanent for everyone,” he said on WJR radio. “No one deserves a tax increase in this economy.”

Still stinging from the Democratic Party’s loss of the House, the White House floated the "decoupling" compromise proposal last week.

Cantor said that the new House GOP majority was sent to Washington, partly by Tea Party voters, with a “mandate” to keep taxes down, not raise them.

“This election ... was really the American people saying they are tired of the lack of results in Washington,” he said. “They want to see more jobs for more Americans. They want to see us ... cut government spending, rein in the size of government so we can get this economy growing again. That was the prescription, that was the mandate that came from the people.”

—This story was posted at 7:45 a.m. and updated at 10:44 a.m.

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