Shift May Push Democrats to Compromise on Tax Cuts

WASHINGTON — President Obama on Wednesday invited Congressional Republican leaders to negotiate about extending the soon-to-expire Bush-era tax cuts, but he stood his ground by arguing against the Republicans’ demand to keep those cuts for income above $250,000.

Yet President Obama’s overture opens the door for extending those top tax rates at least for a year as Republicans play from a strengthened hand in coming weeks.

All the rates expire Dec. 31, a deadline set in 2001 to limit the cost. Extending them for another decade would cost nearly $4 trillion, and more counting the interest on that increase to the federal debt.

Both parties’ strategies are in flux as the election results sink in. But the White House and many Congressional Democrats privately anticipate a compromise that would extend the Bush rates for the middle class for at least five years, and the rates for higher-income individuals for a year or two — in a nod to Republicans’ contention that no one’s taxes should go up until the economy has fully recovered.

The Democrats’ goal is to “de-couple” the tax cuts for middle and high incomes; they argue that if rates for the rich expire first and Republicans move to extend them, they will have a harder time justifying the cost of extending rates that apply to about 2 percent of taxpayers — couples making more than $250,000 a year and individuals earning more than $200,000.

Extending the top rates for 2011 would cost roughly $33 billion; for the decade through 2020, the revenue loss would reach $700 billion.

Republicans continue to insist on a long-term extension for all the tax cuts — as John A. Boehner of Ohio, the Republican in line to become House speaker, reiterated on Wednesday — even as they protest the mounting federal debt.

Some Republicans say they will accept only a deal that extends the tax cuts for the middle class and the wealthy in tandem. And on Wednesday, they were hardly inclined to give ground, having withstood Democrats’ attempts throughout the campaign to portray Republicans as blocking tax cuts for the middle class on behalf of those for the rich.

The Bush tax cuts are one of several pressing fiscal issues that President Obama and Congress must address before year’s end. Others are overdue appropriations for the government’s operations, expiring tax breaks for individuals and businesses, action to forestall big cuts in reimbursements for doctors who treat Medicare patients and the expiration after November of assistance for an estimated two million Americans who have been unemployed for long periods.

All of those issues are crowding the agenda for what is likely to be a short lame-duck session of Congress at mid-month. It will pose a first test of whether President Obama and Republicans can work together to solve knotty problems, though Democrats will remain in control of the House and Senate for that session.

The full story can be found here.

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Reinhard von Hennigs
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