Fate of tax cuts is key issue as Congress returns

The debate over extending the Bush era tax cuts continues after Republican House Minority Leader John Boehner appears willing to make a deal with President Obama.
By Shailagh Murray and Lori Montgomery
Washington Post Staff Writers
Monday, September 13, 2010; 8:02 AM

Congress is returning for a final pre-election legislative session on Monday to confront the thorny issue of potentially raising taxes during an economic downturn, with neither party showing clear consensus on a solution.

The main order of business in the coming weeks will be debating the fate of income tax cuts approved under the George W. Bush administration in 2001 and 2003 that are scheduled to expire at the end of this year. House Minority Leader John A. Boehner (R-Ohio) surprised Democrats on Sunday when he said he might not oppose President Obama's plan to extend the cuts for all but the wealthiest households, although he reiterated his preference for keeping the lower rates in place for all income groups.

Boehner's comments, made on the CBS program "Face the Nation," altered the landscape of the tax debate by suggesting that Republicans might not obstruct Democratic efforts to raise taxes on the top earners - a move advocated by Obama and many other Democrats as necessary to lowering the record deficit.

But the leader's assertion also makes the Republican position on the issue all the murkier. Numerous GOP lawmakers, including Senate Minority Leader Mitch McConnell (Ky.), have been unyielding in their demand that all cuts be extended.

"If the only option I have is to vote for those at [$250,000] and below, of course I'm going to do that," Boehner said. "But I'm going to do everything I can to fight to make sure that we extend the current tax rates for all Americans."

The White House seized on Boehner's comments as a capitulation. "We welcome John Boehner's change in position," White House press secretary Robert Gibbs said in a statement. Boehner's office fired back that Obama's plan was a "job killer" aimed at stoking "class warfare."

Democrats have a full plate of bills they'd like to consider in the coming weeks, mostly related to the bleak economy. But they face dim prospects for scoring many big wins before returning to the campaign trail in early October.

The five-week August break, an unusually long stretch for Congress, brought Democrats little but bad news. The economy isn't showing the clear signs of improvement that the White House and party leaders had expected after 18 months of federal government intervention. Polls show frustrated voters are giving up on the Democrats' four-year reign of Congress and are gravitating to GOP candidates.

Although voter perceptions about the economy are unlikely to brighten between now and Nov. 2, individual Democratic incumbents could use the upcoming work period to soften negative views that their constituents may have about them personally. And by pressing ahead with popular causes such as discouraging the moving abroad of U.S. jobs, the party could rally core supporters and narrow the enthusiasm gap with Republicans.

"Incumbents can make a case and get a second look based on their contributions, what they've done for their districts," said Andrew Kohut, president of the Pew Research Center. "There, I think, there's a little more room to maneuver. But views about the economy are what they are."

The tax-cut debate could be risky for both parties. The Bush-era breaks reduced income taxes for virtually every U.S. taxpayer since their enactment, but to minimize their long-term budget impact they were written to expire this year, leading to what amounts to a $3.8 trillion tax increase over the next decade.

Republicans want to extend all the tax cuts; Obama wants to extend the cuts for households with incomes of up to $250,000 a year and raise rates on income above that threshold. His proposal would cost around $3 trillion over the next decade, with the additional $800 billion going to deficit reduction.

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