By Alexander Bolton - 06/23/10 01:30 AM EDT
Democrats are looking at the possibility of raising taxes on families below the $250,000-a-year threshold promised by President Barack ObamaBarack ObamaMovie trailer gives peek at Obamas' first date Boehner: Ted Cruz a 'miserable son of a bitch' Poll: Most Americans disapprove of ObamaCare MORE during the election.
The majority party on Capitol Hill does not feel bound by that pledge, saying the threshold for tax hikes will depend on several factors, such as the revenue differences between setting the threshold at $200,000 and setting it at $250,000.
Sen. Byron Dorgan (N.D.), chairman of the Senate Democratic Policy Committee, concurred, saying, “I don’t think there’s any magic in the number, whether it’s $250,000, $200,000 or $225,000.
“The larger question is whether we’ll be able to extend the tax cuts for middle-income folks,” Dorgan said. “The answer, I expect, would be yes, but we don’t quite know how it all fits in the larger picture.”
Feinstein said the economy has not recovered as much as Democrats had hoped and uncertainty about the availability of credit remains a problem.
In the aftermath of the financial crisis in Greece, credit markets have been spooked by questions of whether nations will be able to pay their rising debts.
“We have to be very careful what we do to further reduce tax revenues,” Feinstein said.
Thus, raising taxes on families who earn between $200,000 and $250,000 has become more palatable among Democrats.
Federal spending and debt are widely, although not universally, regarded among economists as unsustainable.
Centrist Democrats and most Republicans demand that new spending be offset.
Democratic lawmakers want to shield middle-income families from tax increases, but they don’t necessarily put families making over $200,000 in that category.
“I’m not hard and fast on $250,000,” said Sen. Tom HarkinTom HarkinDo candidates care about our health or just how much it costs? The Hill's 12:30 Report Mark Mellman: Parsing the primary processes MORE (D-Iowa). “Quite frankly, it could be somewhat lower than that. $250,000 — is that the top 1 percent of Americans, or half a percent? I mean, come on!”
Household income data compiled by the Census Bureau in 2008 shows that families earning over $250,000 fall into the top 2 percent.
House Majority Leader Steny Hoyer (D-Md.) hinted in a speech Tuesday that House Democrats do not consider family incomes of $250,000 an inviolable threshold, despite Obama’s pledge.
He said at the event sponsored by the Third Way think tank that “at a minimum,”the House would not extend the tax cuts to taxpayers above $250,000.
Hoyer argued that higher taxes would be necessary to address the $1.5 trillion federal deficit and downplayed threats that such action would hamstring the economic recovery.
“Raising revenue is part of the deficit solution, too,” he said, adding that Congress must also cut spending.
Hoyer said a compromise to cut spending and raise taxes is the only deficit-reduction plan that has a chance of succeeding.
A bipartisan commission Obama established by executive order is scheduled to give its recommendations for reducing the debt by Dec. 1.
Erskine Bowles, co-chairman of the commission, said in April that the panel would consider a proposal to raise taxes on families earning less than $250,000 a year.
During an appearance on Fox News Sunday at that time, Bowles said the president told him that everything should be on the table.
Senate Republicans accused Democrats of breaking Obama’s campaign pledge.
“It is noteworthy that the Democratic leader, the majority leader of the House, is saying that we need to, in effect, raise taxes on the middle class, and the president ought to back off of that pledge as a way to get even more money to spend,” said Senate Republican Leader Mitch McConnellMitch McConnellOvernight Finance: House rejects financial adviser rule; Obama rebukes Sanders on big banks Senators roll out changes to criminal justice bill Sanders is most popular senator, according to constituent poll MORE (Ky.).
“Clearly, that’s the wrong direction, and I don’t think that’s what the American people are asking for,” he added.
McConnell said Democrats are looking to raise taxes because they are having difficulty passing and paying for legislation such as extended tax relief and social safety-net provisions.
“The Democrats used all the revenue in this place on healthcare reform and they can’t do anything else unless there’s more revenue,” said a senior Republican aide.
Senate Democratic Whip Dick DurbinDick DurbinSenators roll out changes to criminal justice bill Let the Democratic veepstakes begin Senate Democrats push climate change bond bill MORE (Ill.) acknowledged that using popular offsets to pay for healthcare reform has made it tougher to find ways to pay for other legislation.
Senate Finance Committee Chairman Max BaucusMax BaucusWyden unveils business tax proposal College endowments under scrutiny The chaotic fight for ObamaCare MORE (D-Mont.) said Tuesday that he has not even begun to focus on the thorny issue of extending Bush-era tax cuts for families earning less than $250,000.
“We’re not looking at that now,” Baucus said.
Sen. Jeff MerkleyJeff MerkleyOvernight Finance: Fed steady on rates; Dems rally behind retirement rule Overnight Finance: Puerto Rico pressure builds; Big tariff vote Wednesday Senate votes to increase wind energy funding MORE (D-Ore.) circulated a flier among colleagues at lunch Tuesday urging them to sunset tax cuts for families earning $250,000 and above. The memo stated that allowing the tax cut that Republicans passed in 2001 to expire would generate $700 billion in revenue.