Tax fight pits Bush vs. Obama

The looming Senate debate on taxes sets up a showdown between George W. Bush and President Obama on tax policy — and the former president could come out the winner.

The Senate is expected to hold dueling votes on extending the cuts before they expire on Dec. 31, and Bush’s policy could get more support in the Democratic-controlled chamber.

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Obama’s proposal to extend tax rates for middle-class families but allow taxes to rise for families making over $250,000 a year is given almost no chance of passing the upper chamber.

Meanwhile, Senate Republican Leader Mitch McConnell (Ky.) is pushing an across-the board extension of the cuts.

Senate insiders think the most likely compromise is a two-year extension of all the cuts, which formed the economic centerpiece of Bush’s presidency.

“What’s likely to happen is there will be an extension of the tax cuts for everybody for a period of time,” said Sen. Byron Dorgan (D-N.D.) in a CNN interview Sunday.

At least seven Senate Democrats have backed away from Obama’s plan and voiced support for extending Bush’s tax policy for another two years.

So far no Senate Republican has endorsed Obama’s plan.

Democrats who could face tough reelections in 2012, such as Sens. Kent Conrad (N.D.), Jim Webb (Va.), Joe Manchin (W.Va.) and Ben Nelson (Neb.), are leery about raising any taxes while the national unemployment rate hovers near 10 percent.

Senate Democrats also controlled one fewer seat — 58 — after Monday, when Republican Sen. Mark Kirk (Ill.) took the oath of office to succeed Democrat Roland Burris.

While these vulnerable Democrats haven’t backed McConnell’s proposal for a permanent extension of the tax cuts, they have indicated support for a short-term extension of Bush-era policy.

Extending the Bush tax cuts for another decade would cost an estimated $4 trillion, according to budget office estimates.

Obama and Democratic congressional leaders will meet with McConnell and House Republican Leader John Boehner (Ohio) on Tuesday morning to discuss how to handle the expiring tax cuts.

A senior Senate Democratic aide disputed the conventional wisdom that Obama’s plan can’t pass the Senate.

“You can make the case that we’re a lot closer to getting 60 votes for the $250,000 plan than for a two-year extension,” the aide said. “No one in our caucus is against extending tax rates for the middle class.”

But Julian E. Zelizer, a professor at Princeton University who has written a book assessing the historical impact of Bush’s presidency, says Bush has won the debate over taxes.

“Bush has already won the debate because a lot of people will see their rates stay the way they are,” Zelizer said. “Obama is working within the framework that President Bush established instead of starting his own agenda in these areas of policy.”

Liberal advocates who favor higher taxes to support government programs designed to create jobs agree that Bush has won a big part of the tax debate.

“It is stunning we’re heading into this period where everyone is focused on deficit reduction to the point they want to go after Social Security and the starting point is that they want to extend the Bush tax cuts for families earning under $250,000,” said Robert Borosage, co-director of the Campaign for America’s Future, a liberal advocacy group.

Centrist Republican Sen. Olympia Snowe (Maine) provides an example of how the tax debate has shifted in Bush’s favor.

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Snowe voted against the Bush tax cuts of 2003 but, earlier this year, declared her support for a permanent extension of all the Bush tax rates. She could face a conservative primary challenger in 2012.

Snowe’s stance on extending all the Bush tax cuts makes it more difficult for Democrats to pass an alternate proposal pushed by Sen. Charles Schumer (D-N.Y.) that would extend tax rates for all families earning less than $1 million for a year.

Three Democrats facing reelection in 2012 — Manchin, Sen. Robert Menendez (N.J.) and Sen. Claire McCaskill (Mo.) — have voiced support for Schumer’s plan.

But Republicans have dismissed it as a political talking point.

“There’s no economic basis for it — it’s not about job creation or economic growth; it’s a messaging platform,” said a senior Senate Republican aide. “Messaging platforms work well before Nov. 2, but at this point people are looking for results.

“You can’t find any economist of any stature that would pay any significance to an arbitrary number like that,” said the aide.

Senate Majority Leader Harry Reid (D-Nev.), however, has yet to promise a vote on Schumer’s alternative. Reid told reporters last week that he would schedule a vote on extending tax rates for the middle class and

McConnell’s plan to extend all of the Bush tax cuts permanently.

Conservatives say that Obama handed Bush a partial victory on the tax debate when he promised to keep the 2001 tax cuts for families earning less than $250,000 a year.

Andrew Roth, vice president of government affairs at the Club for Growth, said Bush’s tax policies have strong public support.

“The proof is playing out that way because Obama is not touching the cuts for the lower-income class and the middle-income class, he’s agreeing with the Bush policy,” said Roth.

Boehner called for a two-year freeze on all tax rates in mid-September and has since demanded a permanent extension of the Bush tax cuts.

The House Republican’s Pledge to America, unveiled in late September, called for a permanent stop to all “job-killing tax hikes.”

Meanwhile, House Majority Leader Steny Hoyer (D-Md.) told Democratic colleagues last week they would vote on legislation extending tax rates only for families earning below $250,000.

Russell Berman contributed to this report.

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