Obama proposes tax-cut extension for middle-class households

President Obama on Monday called for an extension of the George W. Bush-era tax cuts for the middle class, setting up an election-year showdown with congressional Republicans and sharpening the contrast with Republican rival Mitt Romney on the crucial issues of taxes.

At an event staged in the East Room with working families, Obama announced that he would support a one-year extension for households earning less than $250,000, citing the tough economic times “when so many people are trying to get by.” But the president added that he supports allowing the tax cuts to expire at the end of the year for higher-income earners, putting him at odds with the GOP, which favors extending them for all income levels.

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Obama has long advocated higher taxes for wealthier Americans, but by renewing the push four months before the election, the White House is calculating that forcing Republicans to reject the president’s proposal would put GOP lawmakers, and Romney, in a difficult position at a time when the key political questions revolve around the struggles of ordinary Americans.

“Many members of the other party believe that prosperity comes from the top down, so that if we spend trillions more on tax cuts for the wealthiest Americans, that that will somehow unleash jobs and economic growth,” Obama said. “I disagree. I think they’re wrong. I believe our prosperity has always come from an economy that’s built on a strong and growing middle class.”

The tax cuts dating to the Bush administration are set to expire for all income levels at the end of this year. And the debate over tax fairness has grown more pronounced with the looming deadline, this winter, of the “fiscal cliff” — a combination of mandatory spending cuts and tax increases agreed upon last year to tame the deficit that many economists believe could throw the country back into recession.

The White House and Congress have shown few signs of coming to an agreement to head off such a scenario. Republicans quickly denounced Obama’s latest proposal, arguing that it was an attempt to distract the public from the poor economy.

House GOP leaders have scheduled a July 23 vote on a one-year extension of the tax cuts for all income earners, and they charged that the president’s plan would raise taxes on small-business owners.

“President Obama is still asleep at the switch when it comes to our economy and jobs,” House Speaker John A. Boehner (Ohio) said Monday. “In the wake of another weak jobs report, the president is doubling down on his quixotic call for the same small-business tax hikes that have been routinely rejected by the House and Senate.”

Romney spokeswoman Andrea Saul echoed that sentiment, calling Obama’s proposal “a massive tax increase.” She added that it “proves again that the president doesn’t have a clue how to get America working again.”

Obama said his plan would cover 98 percent of the working public and 97 percent of small-business owners. Allowing the tax cuts to expire for higher-income earners, the president added, would bring additional revenue to help pay down the spiraling national debt.