Domestic Taxes

Tax fight heating up between the parties

The White House opened a new front in its fight with Republicans over
taxes on Tuesday, arguing that 114 million middle-class families would
get hit in the wallet unless Congress acted by the end of the year.

Vice President Biden, armed with a new report from the White House’s National Economic Council that contended families would see an average hike of $1,600 if George W. Bush-era rates and other current tax policies expired, accused Republicans of “holding the middle-class tax cuts hostage.”

{mosads}Biden’s comments, and the new White House report, come as Democrats and Republicans continue to joust for the political advantage on tax policy, and right before lawmakers start to hold votes on competing tax visions.

The Senate is expected to vote Wednesday on proceeding with President Obama’s proposal to extend, for one year, Bush-era tax rates on family income up to $250,000. The Democratic bill includes a host of other tax provisions, such as language to raise the top rates on dividends and capital gains to 20 percent. Some of those proposals dovetail with Obama’s tax plan, but others do not.

The measure is not expected to win the 60 votes necessary to clear the procedural hurdle, since Republicans are pushing to extend all the current rates on income, capital gains, dividends and the estate tax for a year.

But top Democrats say they are confident the vote will show a majority of senators support the Obama tax proposal.

Their efforts were boosted Tuesday by Sen. Joe Manchin (D-W.Va.), who voted against a 2010 proposal that would have cut off Bush-era rates at $250,000 but said he would back the Democratic plan this time around.

“When considering these two proposals, I kept two priorities in mind: putting our fiscal house back in order and restoring fairness to the tax code,” Manchin said Tuesday on the Senate floor.

“So, while I would prefer a bipartisan, comprehensive solution, I will support the plan to keep taxes low on families that make less than $250,000.”

Democrats currently control 53 seats in the Senate, and two other senators who caucus with the party — Joe Lieberman (I-Conn.) and Jim Webb (D-Va.) — have publicly signaled that they will not back the Democratic plan.

Sen. Ben Nelson (D-Neb.), who is not seeking reelection this year and voted against the $250,000 threshold in 2010, has said that he would prefer a $1 million cut-off but that he was considering the current Democratic proposal.

A Nelson spokesman said the Nebraska Democrat had not yet announced how he would vote on Wednesday.

Majority Leader Harry Reid (D-Nev.) said he was continuing to offer Republicans the opportunity for straight up-or-down votes on both the Democratic and Republican tax proposals. The offer suggests Reid thinks his plan would get more votes on the Senate floor than the Republican version.

The expected Wednesday vote will kick off a week or so of largely political votes on Capitol Hill.
Biden on Tuesday acknowledged that the Democratic proposal faced an uphill climb in Congress, and Washington observers generally expect Bush-era rates and other top fiscal issues to be punted into the post-election session of Congress.

“As usual, we’ll probably have a 60-vote threshold even to be able to get to it, but that’s being worked on now in the Senate,” Biden told reporters on a Tuesday conference call.

Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday that, in addition to the GOP proposal, Republicans would like a vote based on exactly what President Obama has proposed, which does differ in some respects from the Senate Democratic package. In making the request, McConnell is seeking to show Obama and Senate Democrats differ on tax policy.

House Republicans, meanwhile, introduced their own plan that extends all Bush-era rates, and a measure that seeks to force tax reform in 2013. The House is expected to vote on those bills next week.

The White House’s Wednesday push on taxes dovetailed with Obama’s campaign message of late, and, for now, both Republicans and Democrats on Capitol Hill seem to be on board with their party’s strategy. 

Republicans have said that allowing anyone’s taxes to rise next year is a mistake, given the sluggish economic recovery, and that the Democratic plan would hit some 940,000 small businesses. 

With Democrats casting themselves as champions of the middle class, Biden said Tuesday that he didn’t “begrudge” the highest earners their wealth. 

But, the vice president added, extending the tax cuts for the top earners would cost $1 trillion over a decade, while the extra savings from an extension of current rates could be a boon to middle-class families. 

“We’ve seen this movie before and we know how it ends,” Biden said. “It didn’t work before.

“What happened? The rich got richer,” he explained, while most Americans got “nailed.”

Senate Democrats also tried to make the case Tuesday that their GOP counterparts, by not pushing to extend expansions of tax breaks like the Earned Income Tax Credit (EITC) and a credit for education expenses, were harming working families. 

“They’re OK to raise taxes on many middle-class people, as long as they get their tax breaks for the very wealthiest among us,” said Sen. Charles Schumer (D-N.Y.). “That’s an amazing and astounding point.”

Senate Minority Whip Jon Kyl (R-Ariz.) said Tuesday that it was just brought to his attention that the GOP bill didn’t extend those targeted provisions, but added that it made “no sense” to hold up a broad tax extension because of “little things” like the EITC.

“Stop and think about it again: You’ve got over $4 trillion in tax increases about to happen, on every American,” Kyl said. 

And while Democrats cite polling in their favor on the tax issue, Republican lawmakers noted Tuesday that Democrats seemed more divided on issues like the estate tax.

Still, even as both sides express confidence, experts say that the parties’ chosen paths could offer some landmines. 

Julian Zelizer, a professor of history and public affairs at Princeton, said that Democrats had appeared to find a way to be on the side of tax cuts, and not just tax increases for the wealthiest.

The danger for Republicans, Zelizer said, “is that Democrats use this to paint the GOP as the party holding middle-class tax cuts hostage for the rich.”

But he added that Democrats face their own risks. “The danger for them is the GOP is able to frame this as dividing Americans as opposed to pushing tax cuts,” Zelizer said.

Tags Charles Schumer Harry Reid Joe Manchin Mitch McConnell
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