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ThePlumLIneGS whorunsgov plumline
Posted at 02:15 PM ET, 07/16/2012

Dems to play hardball in tax fight?

There’s a lot of chatter about Senator Patty Murray’s big speech today, in which she is claiming that Dems hold the leverage in the coming “fiscal cliff” talks over the Bush tax cuts, and that they will let all the tax cuts expire if necessary, in order to force the GOP’s hand.

The idea is that if all the cuts expire, Dems can come back and renew just the middle class cuts, and dare Republicans to vote against it:

“If we can’t get a good deal, a balanced deal that calls on the wealthy to pay their fair share, then I will absolutely continue this debate into 2013,” Murray plans to say, according to excerpts of the speech provided to The Washington Post.
If the tax cuts from the George W. Bush era expire and taxes go up for everyone, the debate will be reset, Murray is expected to say. “Every proposal will be a tax-cut proposal,” according to the excerpts, and Republicans would no longer be “boxed in” by their pledge not to raise taxes.
“If middle-class families start seeing more money coming out of their paychecks next year, are Republicans really going to stand up and fight for new tax cuts for the rich? Are they going to continue opposing the Democrats’ middle-class tax cut once the slate has been wiped clean? I think they know this would be an untenable political position.”

It won’t be lost on rank and file Dems and Dem candidates that Murray is the chair of the DSCC; she’s signaling that she thinks this battle makes for good politics in down-ticket races. The idea here is to separate the debate over the middle class tax cuts from the debate over the high end ones; if the latter debate can be isolated, it’s a tougher position for Republicans. Dems, of course, failed to accomplish this in 2010; they threatened to hold a vote just on extending the middle class cuts, but ultimately punted it until after the elections. While it remains to be seen whether Dems will stick to their hard line this time, there are signs that they are genuinely convinced they hold the upper hand.

Again: The Obama/Dem proposal would cut taxes on all income up to $250,000, even that enjoyed by the “job creators” and “small business people” who make more than that. Republicans won’t support this proposal, because so doing would deprive them of leverage over tax rates only on income above that level, which is earned by two percent of taxpayers. And we’re not even talking about all of those people’s income; all their income below $250,000 would also continue to be taxed at the lower rate under the Dem plan. See this in chart form right here.

There will be a vote in the Senate this month on this proposal. But right now we’re only talking about a continuation of the low rates. If the tax cuts expire, and Murray’s scenario comes to pass — again, a big if given previous Dem behavior — Republicans would have to vote against an outright reduction of tax rates on all that income, simply because they also want a reduction of the rate on income above that. If that isn’t enough to clarify the debate, it’s unclear what will.

By  |  02:15 PM ET, 07/16/2012

 
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