House Dem leaders avoid specifying tax rates for top earners

House Democratic leaders this week are making no ultimatums about what tax rate the nation's highest income earners should pay.

They demand that the top rate be raised in the name of deficit reduction but they are avoiding being specific as to the precise level.

Although President Obama and other top Democrats have vowed for two years to allow rates on the highest earners to jump back to Clinton-era levels at year's end, and some Senate Democrats remain focused on that goal, House Democratic leaders now say the specific rate is less important than the effect of a larger budget package on the economy and revenue creation.

ADVERTISEMENT
"I'm fairly agnostic about certain things. I just want to have something that is fair and that will work," House Minority Leader Nancy Pelosi (D-Calif.) said Thursday, responding to a question about whether the top marginal rate should jump almost 5 percentage points on Jan. 1, as scheduled. "What is it that produces growth? Let's put that on the table."

Pelosi said she would prefer to see the top rate rise from 35 to 39.6 percent at the end of the year — "I would like that to happen," she said — but she was quick to add that members of her caucus have provided her with a long list of ideas for raising revenues, suggesting that even liberal Democrats might back a lower-than-Clinton-era rate for the wealthy if the larger package made up the revenue difference elsewhere.

Such a package, she said, would combine "responsible cuts" with new revenues generated "by having something more similar to the Clinton rates" for the wealthy.

"What we want is the top 2 percent [of earners] to pay their fair share," Pelosi said.

Rep. John Larson (Conn.), chairman of the House Democratic Caucus, delivered a similar message Thursday, saying he'll insist on keeping the Bush-era tax rate for the middle class but hasn't drawn any lines regarding the rates for the wealthy.

"I'm drawing lines in the sand with respect to what we need: Putting people back to work, [a] tax cut for people earning below $250,000 and making sure that we're preserving our social safety net," Larson said.

"There's a lot of pre-negotiation dancing going on," echoed Rep. Ron Kind (Wis.), the newly elected chairman of the New Democrat Coalition. "But I think it doesn't behoove any side to be drawing any lines or taking anything off the table."

Two years ago, with the Bush-era tax rates set to expire for all incomes, President Obama agreed to GOP demands to extend the lower rate for everybody through 2012. He vowed, however, that he'd let the higher, Clinton-era rate kick in at the end of this year for families earning more than $250,000.

It was a hard line the president maintained until Wednesday, when he appeared to give himself some wiggle room on the issue. In his first press conference since June, Obama said that, while he still wants to raise income taxes on the wealthy to reduce deficits, he's “less concerned about red lines” on specific rates than he is with raising revenues and helping the middle class.

For any lawmakers with alternative revenue-creating ideas, Obama said, “I’m not just going to slam the door in their face."

"I want to hear ideas from everyone,” he said.

Although some liberals howled at the thought that Obama would weaken his push for a return to the 39.6 percent rate, some Democrats are cheering his remarks as a sign of progress in the negotiations.

"It shows reasonableness if he's willing to play within those [rates]," Rep. Mike Quigley (D-Ill.) said Thursday. "If people are just worried about signs of weakness, we're not going to get anything done."

Meanwhile, some Republican leaders — particularly House Speaker John Boehner (Ohio) — have hinted at a new, post-election willingness to support an increase in federal revenue by means other than hiking marginal rates. But those changes, they emphasize, must be accompanied by reforms to entitlement programs like Medicare and Social Security.

"2013 should be the year we begin to solve our debt through tax reform and entitlement reform," Boehner said following the elections.

That notion will be among the major sticking points of the looming "fiscal cliff" and deficit grand bargain debates, with Pelosi and a number of other Democratic leaders arguing that entitlement reform has no place in the budget talks.

"I'm in agreement with those who have said Social Security shouldn't be part of this negotiation," Larson said Thursday.

With leaders from both parties scheduled to meet with Obama at the White House Friday morning to launch the fiscal cliff talks in earnest, some lawmakers are hoping all sides will bring open minds to the debate.

"When we finally sit at the table, there are things we're going to eliminate through discussion, and possibly — hopefully — agree on upon discussion," Rep. Gerry Connolly (D-Va.) said Thursday. "But at the very beginning, before we've even sat down at the table, how about we agree that everything stays on the table until we've had a chance to discuss it?"

To be sure, some Democrats say the focus must remain on raising the rates on the wealthiest earners.

“For us, it’s very clear. Our position is that we must return to the Clinton era rates,” Rep. Sandy Levin (D-Mich.), the ranking member on the tax-writing Ways and Means Committee, said Thursday.

“You have all read the CBO report. The CBO makes clear how critical the middle-class tax rates are and how insignificant is extending the upper income tax cut to the economy,” he said. “We should [return to] the Clinton era tax rates. Period.” 

Pelosi on Thursday suggested that at least one element of the tax debate — the $250,000 threshold defining wealthy earners — appears decided.

"The president campaigned on the 250 [mark], the American people support that," she said. "I think that's where a good deal of leverage is in these negotiations."

On the whole, Pelosi agreed with the notion that the negotiators should all stay flexible. She even declined to say how much deficit reduction she'd like to accomplish in the coming budget talks.

"Maybe that first meeting is to determine that framework," she said. "We'll see tomorrow."


—Updated at 6:38 p.m.

Erik Wasson contributed to this story.