Obama, Congress seek to avoid brawl on extending tax cuts

President Obama and congressional leaders moved Tuesday to head off a tax showdown on the House and Senate floors.

They agreed at a White House meeting to appoint a six-person team to negotiate a deal over how to extend the Bush tax cuts, which expire on Dec. 31.

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Senate Democrats have shied away from a floor fight, which had seemed likely. Their caucus is split over whether to extend all current tax rates or to let the federal government’s take rise for families earning more than $250,000.

Treasury Secretary Timothy Geithner and Office of Management and Budget Director Jacob Lew will represent the president in the tax talks. Finance Committee Chairman Max Baucus (Mont.) will represent Senate Democrats and GOP Whip Jon Kyl (Ariz.) will represent Senate Republicans.

Rep. Chris Van Hollen (Md.), who will serve as the senior Democrat on the Budget Committee next year, and Rep. Dave Camp (Mich.), the ranking Republican on the Ways and Means panel, will represent the House caucuses.

The negotiating team was scheduled to hold its first meeting on Tuesday afternoon.

Senate Majority Leader Harry Reid (D-Nev.) had threatened after the election to pummel Senate Republicans by forcing them to vote repeatedly on Obama’s tax plan, which would set a $250,000 threshold for raising tax rates.

Senate Democratic leaders appeared to choose a different tack after hours of caucus meetings failed to achieve a unified position on tax cuts.

Senate Democrats held nearly 10 hours of meetings the week after the election to discuss their tax strategy, and met again for a couple hours on Tuesday.

“The Democratic caucus is very diverse and there are a lot of strong opinions in there,” said Sen. Mark Pryor (D-Ark.) after Democrats left Tuesday’s meeting without reaching any agreement.

A new proposal gaining attention would extend tax rates for middle-class families and set aside an estimated $700 billion in new revenue from tax increases on wealthy families to pay for deficit reduction.

Senate Republicans, by contrast, have told Obama that their conference will stand unified against legislation that would allow any income tax rates to increase.

“We did have the opportunity to reiterate [that] it is the view of 100 percent of Senate Republicans, and a number of Senate Democrats as well, that the tax rates should not be bifurcated; in other words that we ought to treat all taxpayers the same,” Senate Minority Leader Mitch McConnell (R-Ky.) told reporters after the White House meeting.

Democratic and Republican leaders praised Tuesday’s meeting with Obama as one of the first promising signs of bipartisanship since the midterm elections.

“It was very, very efficient — very, very productive meeting that we had in the White House today,” said Reid.

“I would hope this will allow the American people to say we’re trying to work in good faith to come up with a bipartisan proposal,” he said.

Reid said if the talks fail, he will move ahead with a proposal that “we believe is the best thing for the American people.”

Some rank-and-file Democrats would like to vote on Obama’s tax plan to put themselves on record as supporting lower tax rates for the middle class but not for the nation’s wealthiest families.

“I think we hold our ground, and I think we have strong ground,” said Sen. Mark Udall (D-Colo.). “I think it’s equal in elevation to the ground the Republicans are on.”

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Speaker Nancy Pelosi (D-Calif.) reiterated her concerns about an extension of tax rates for families earning more than $250,000 and individuals who make more than $200,000.

“Democrats continue to have concerns about the impact on the deficit of giving a tax cut to the nation’s wealthiest 2 percent,” Pelosi said in a statement after the meeting.

“We must evaluate every proposal as to how it creates jobs, grows our economy and reduces the deficit.”

Pelosi also told Obama that he should not agree to lower tax rates for high-income earners if he is considering cuts to Social Security outlined by the co-chairmen of the fiscal commission he established, said a Democratic source.

Pelosi also pushed for an extension of federal unemployment insurance benefits, which begin to expire on Wednesday.

“It is essential for those who lost their jobs through no fault of their own, and it also provides a major boost to the economy,” Pelosi said in a statement.

Senate Republicans told Obama and Reid that the Senate should focus on extending the Bush tax cuts and passing a spending measure to keep the federal government in operation.

But Democratic leaders do not seem inclined to set aside priorities such as limited immigration reform and repeal of the military’s “Don’t ask, don’t tell” policy.

Reid said he would file a motion on Tuesday to bring the DREAM Act to the floor for debate. The legislation would grant the children of illegal immigrants permanent legal residency if they meet certain requirements.


Sam Youngman contributed to this report.