Obama sets up Round 2 on Bush rates

President Obama is picking a fight with Republicans over tax rates for the wealthy just two months after a lame-duck compromise shoved the issue to the backburner. 

The White House’s budget proposal for fiscal 2012, released on Monday, shows that Obama isn’t abandoning his 2008 campaign pledge to raise taxes for high earners, despite accepting a two-year extension of the George W. Bush-era tax rates in December. 

And in an apparent bet that he is on the winning side of the issue, Obama upped the ante on taxes in the new budget, calling for a 30 percent cut to itemized deductions taken by the wealthy.

The attempt to rekindle the debate signals that the White House sees a political advantage in the issue heading into the president’s 2012 reelection campaign. 

The president and his advisers maintain that the proposals they released Monday are the smart approach to the deficit, investing in areas that are essential to the country’s future and cutting spending elsewhere.

Republicans roundly panned the budget proposal, saying it spends, borrows and taxes too heavily. Republicans on the House and Senate Budget panels said the White House initiatives would raise taxes by roughly $1.6 trillion.

“The president’s big-government vision imposes a heavy cost: diminishing economic opportunity through massive tax hikes that depress wages and stifle job creation at a time when millions of Americans remain out of work,” a report from the panels said. 

The White House’s budget is in many ways a starting point for the debate over how to reduce the deficit, as both Democrats and Republicans try to push their approach to government spending. 

“The budget process is really an exercise in politics on both sides,” said John Feehery, a Republican strategist and contributor to The Hill’s Pundits Blog. 

The president’s 2012 budget includes policies that the administration could not get through Congress last year, such as ending the Bush-era tax rates for the wealthy and rolling back tax breaks for the oil-and-gas industry. 

Mo Elleithee, a former spokesman for Hillary Rodham Clinton’s presidential campaign, said Republicans would be misreading the mandate from November’s midterm elections if they continued to resist tax increases on the wealthy. 

“The American people want to see a serious, realistic approach to growing the economy and cutting the deficit,” Elleithee said. “It seems like the only people that are tone-deaf on that point are the Republican leaders in Congress.”

But Feehery, a former aide to then-House Speaker Dennis Hastert (R-Ill.), said Obama was being cynical by trying to get Republicans to raise taxes when Democrats refused to do it during the last Congress. 

“Republicans are taking a much more courageous view of it, really taking the meat off the bone and making the tough choices. The president isn’t even pretending to be realistic,” Feehery said. “You can be a cynic and maybe survive, but that’s not real leadership.”

The White House budget for 2012 would end the Bush tax cuts for income above $200,000 for individuals and $250,000 for families at the end of 2012 and bring the recently enacted estate tax figure back to its 2009 levels — just weeks after a compromise brokered in part by the administration put those policies into place.

In a message accompanying his budget, the president said that those tax policies “were unfair and unaffordable when enacted and remain so today” and that he was forced to accept them for two years to stop a tax increase on the middle class. 

The president also proposed paying for a three-year “patch” to the Alternative Minimum Tax (AMT) by reducing the amount wealthy taxpayers can take in itemized deductions — affecting, among other things, mortgage and charitable deductions. 

And, as he has in previous budgets, the president suggested limiting corporations’ abilities to defer income tax on income raised overseas. He also called for making permanent a tax credit for research and development and repeated his desire, with little new detail, for Congress to begin work on reforming the corporate tax code. 

Two of the more prominent conservative lawmakers, Sen. Jim DeMint (R-S.C.) and Rep. Mike Pence (R-Ind.), reinforced some of their party’s differences with the White House on Monday, introducing legislation that would make all of the following permanent: a patch to the AMT, the Bush tax cuts and a repeal of the estate tax. 

“By enacting a two-year extension on current tax rates, Congress merely extended the uncertainty that has stifled our economic growth,” Pence said.