Dem leaders urge expiration of tax cuts for the wealthy

The top House Democrats joined forces Tuesday to urge Republicans to back President Obama's plan to hike taxes on the wealthiest Americans next year.

In rare testimony before a House committee, Minority Leader Nancy Pelosi (D-Calif.) and Democratic Whip Steny Hoyer (Md.) said allowing the Bush-era tax rates to expire in January for the highest incomes would bring fairness to the nation's tax code while also reining in soaring deficit spending.

The Democrats emphasized that both parties support a continued tax break for lower incomes, and they called on Republicans to support such a plan now and tackle separate disagreements later.

"We all agree that there has to be a middle-income tax cut," Pelosi told members of the House Rules Committee. "Whatever else we have [to address], we can continue that conversation later. But do not hold the middle-income tax cuts hostage to giving tax cuts to high-end [people]."

Hoyer delivered a similar message, amplifying the Democrats' argument that only with a balanced package of spending cuts, entitlement reforms and tax hikes can Congress successfully confront the nation's fiscal crisis.

"The real issue is how do we pay our bills?" Hoyer told the panel. "We buy Social Security, we buy Medicare, we buy defense – we have to decide how to pay for it."

The debate over what to do with the Bush-era tax rates has swirled around Congress for years, as Republicans have pushed to extend the lower rates for all Americans and Democrats have urged an expiration of the benefit for the highest incomes.

In late 2010, Obama capitulated to GOP demands to extend the Bush rates to everyone in order to secure certain provisions favored by Democrats, including a renewal of unemployment benefits and an extension of a payroll tax cut. This year, however, with expiration of all the Bush rates looming Jan. 1, Obama and the Democrats are vowing to extend the tax benefit only on income below $250,000.

With Obama's endorsement, Senate Democrats this month passed legislation doing just that, and GOP leaders have said they'll let Democrats offer that bill as an amendment to the Republicans' blanket tax benefit proposal, scheduled for a floor vote this week. Indeed, behind Rules Committee Chairman David Dreier (R-Calif.), the Republicans on the Rules Committee Tuesday night approved a rule allowing a vote on the Democrats' alternative.

Most of Tuesday's Rules hearing, however, simply featured a replaying of the old partisan squabbles that have surrounded the Bush tax cuts since they were enacted roughly a decade ago.

Arguing for the Republicans, Rep. Dave Camp (Mich.), chairman of the House Ways and Means Committee, told the panel that a tax increase on the wealthy would harm businesses and therefore stifle hiring.

"It's about jobs," Camp told the panel. "The economy remains weak … [and] as the president said, 'You don't raise taxes in a recession.'"

Camp cited a new Ernst and Young report which found that Obama's plan to extend the lower rates only for incomes below $250,000 would cost the economy more than 700,000 jobs.

"Middle class families cannot afford any more job losses," Camp said.

Democrats were quick to respond with questions about why, if the Bush tax rates for the top incomes are so vital to job creation, did unemployment leap at the end of Bush's tenure with those rates in place?

"It simply didn't work," said Rep. Louise Slaughter (N.Y.), senior Democrat on the Rules Committee.

Both sides say they support a broader overhaul of the nation's archaic tax code, but with the clock ticking down towards November's elections, almost no one on Capitol Hill considers such an overhaul possible this year.

Indeed, the GOP bill includes a targeted timeline for Congress to move on more comprehensive tax reform, but not until next year.

The Rules Committee on Tuesday was also scheduled to consider a one-year extension of the farm bill – the House Republicans' short-term alternative to the Senate's bipartisan five-year proposal. After leaders from both chambers met on that issue throughout Tuesday, however, GOP leaders pulled their proposal from the Rules agenda just before the 5 p.m. hearing began.