Dorgan: Dems likely to seek extension of tax cuts for households under $250K

Democrats are likely to seek extensions of President George W. Bush's tax cuts for households earning less than  $250,000, a top Senate Democrat said Friday.

Sen. Byron Dorgan (D-N.D.), the chairman of the Senate Democratic Policy Committee, said lawmakers would work to honor President Barack Obama's pledge not to raise taxes for families making less than $250,000, but left wiggle room for that threshold to be lowered.

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"President Obama has indicated that he wants to extend those tax cuts for those with $250,000 in income and below," Dorgan said on CNBC. "So I think Congress will work very hard to get that done. But times have changed."

The tax cuts sought by Bush in 2001, which were phased in slowly during the last decade, are set to spring back to their original rates at the end of this year, barring congressional action.

But Democrats face a difficult choice before the end of the year, between maintaining those tax cuts and adding to budget deficits, or making the politically unpopular decision to raise taxes.

Some Democrats have signaled a willingness to punt on tackling the taxes until after November's midterm elections, but Dorgan, who will retire at the end of his term in January, expressed an interest in tackling income taxes, as well as a dividend tax rate that will spring upward at the end of the year as well.

Dorgan got behind Treasury Secretary Tim Geithner's suggestion that Congress might allow the dividend tax cut to rise to 20 percent, but not rise all the way to a 39.6 percent rate that would kick in next year without legislative action.

"I think that's possible. There's a current 15 percent rate, and I think it's possible that may end up at 20 percent," he said.

But Dorgan left open the door to higher income or dividend taxes, as some of his more liberal colleagues have suggested higher taxes might be needed.

"I have also said that $250,000, there's nothing magic about that level," he said. "In the longer term, I think everyone has to understand we're in a fiscal policy situation that is very difficult."

Dorgan framed the overall choices facing lawmakers as being about economic growth.

"I think we have to put it all in a bowl and try and figure out what makes sense, what will promote the most significant economic growth. What we're interested in doing is growing this economy, which will also help with the deficit," he said. "I don't know where exactly we'll end up with respect to the $250,000 and below, my guess is we'll extend the tax cuts at that level — $250,000 and below. And we certainly want to do something on the capital gains rate that will incentivize capital formation in this country."