Divided Democrats battle each other over extending tax cuts for rich

The issues of taxes roiled the Democratic party on Monday, with several members staking out ground in the debate.

Senate Majority Leader Harry Reid (D-Nev.) blasted Republicans for holding up tax cuts for the middle class to preserve tax cuts for the wealthy, while other Democrats in the House and Senate warned ending any tax cuts could hurt the struggling economy.

Senate Democrats are expected to move to tax legislation soon, possibly as early as this week, but have not decided how to handle the tax rates for wealthier individuals and families, a Senate leadership aide said.

Legislation will focus on the middle-class tax cuts, the aide said. Whether the legislation will include an extension of upper income tax breaks remains an outstanding issue. 

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Reid argued that allowing the middle-class tax cuts to expire in order to save tax cuts for the wealthy is “bad economic policy that will hurt our nation and its recovery.” He added that extending the tax cuts for wealthier taxpayers would secure more “giveaways for millionaires and CEOs who ship American jobs overseas.”

“Regardless of what any individual senator may think about tax cuts for the wealthiest Americans, I had hoped we could all agree that middle-class families deserve to have their taxes cut,” he said in the prepared remarks. 

President Obama and Democratic congressional leaders want to extend all tax cuts for individuals making less than $200,000 and couples earning less than $250,000 annually, while allowing tax cuts for wealthier people to expire.

But more Democrats on Monday came out against Obama’s plan.

“I don’t think we ought to be drawing a distinction at $250K,” Sen. Jim Webb (D-Va.) told Fox News.

Separately, Sen. Joe Lieberman (I-Conn.), who caucuses with Democrats, also expressed strong support for temporarily extending all of the tax cuts to aid the economic recovery.

“I don’t think it makes sense to raise any federal taxes during the uncertain economy we are struggling through,” he said. “The more money we leave in private hands, the quicker our economic recovery will be.”

In the House, several rank-and-file Democrats are urging their leaders to back an extension of all of the tax cuts. Speaker Nancy Pelosi (D-Calif.) has staked out the same position as Obama, that tax cuts should only be extended for the middle class.

“Given the continued fragility of our economy and slow pace of recovery, we share their concerns,” stated a draft letter being circulated by Rep. Gary Peters (D-Mich.) and other Democrats.

Democratic Sens. Ben Nelson (Neb.), Kent Conrad (N.D.), and Evan Bayh (Ind.) previously have questioned the wisdom of raising taxes during one of the roughest recessions on record.

While there is division in the Democratic party over how to handle the tax rates, Republicans have their own problems.

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House GOP leader John Boehner (Ohio) on Sunday made waves by saying he could agree to extend tax cuts for the middle class while allowing other tax cuts to expire if that were his only option.

Boehner has since tried to walk back that remark on CBS News, with a statement and then a tweet.

“We should stop all the tax hikes because that is what's best for the economy and small business job creation,” Boehner said Monday on his Twitter account.

Other Republicans have said no tax increases should be considered.

House Republican Whip Eric Cantor (R-Va.) on Monday said he “will do everything in my power to stop President Obama and Speaker Pelosi from raising taxes on working families, small businesses, and investors.

"Raising taxes in this environment is a non-starter for me and millions of American small business people who are struggling to keep the lights on and meet their payroll obligations," Cantor said, adding, "I am calling on Speaker Pelosi and President Obama to allow all member of the House — Republican and Democrat — to vote on legislation that would prevent tax increases for every American."

This story was updated at 4:45 with new information.