By Lori Montgomery
Monday, November 8, 2010; A03
President Obama said a Republican proposal to preserve the full array of Bush administration tax cuts for two more years presents a "basis for conversation" that could lead to a compromise as lawmakers prepare to meet next week for a high-stakes showdown over taxes.
But a senior House Republican on Sunday flatly rejected the option most favored by the White House: decoupling the Bush tax cuts that benefit the wealthy from the cuts that benefit the vast majority of Americans by extending each set of provisions for a different period of time.
"No, I am not for decoupling the rates," Rep. Eric Cantor (Va.), the No. 2 Republican in the House, said on "Fox News Sunday." He echoed the GOP argument that such a move virtually would guarantee the eventual expiration of tax breaks in the upper brackets, where some of the most successful small businesses pay taxes.
"I am not for raising taxes in a recession, especially when it comes to the job creators that we need so desperately to start creating jobs again," Cantor said. "I am not for sending any signal to small businesses in this country that they're going to have their tax rates go up."
The comments highlighted the shifting political landscape in the wake of Republican gains in last week's midterm elections. Obama, who has argued that the nation cannot afford to keep the tax cuts for millionaires, has been adopting a conciliatory tone in recent days in hopes of reaching a deal with resurgent Republicans to prevent all the cuts from expiring on schedule - an outcome that would sharply increase IRS withholding in January for virtually every American taxpayer, including the middle-class families Obama has sworn to protect.
"My number one priority coming into this is making sure that middle-class families don't see their tax rates go up January 1st," Obama said in an interview with CBS's "60 Minutes" that aired Sunday.
Asked on the show about a proposal by House Republican leader John A. Boehner (Ohio) to cut spending back to 2008 levels and extend all the Bush tax cuts - even those that benefit the wealthy - for two years, Obama said: "I think that when we start getting specific like that, there's a basis for a conversation. . . . We can look at what the budget projections are. We can think about what the economy needs right now, given that it's still weak. And, hopefully, we can agree on a set of facts that leads to a compromise."
Republicans, meanwhile, have been less accommodating, with some suggesting that they could simply hold off until January, when they will control the House and hold a stronger hand in the Senate. That would set the stage for a more powerful push to permanently extend all the cuts - the preferred GOP alternative.
"They might blame GOP obstructionism. But, you know, people are going to start missing a lot of money in their weekly paychecks in January. And there's only going to be one person in the White House," said a Republican House aide, speaking on the condition of anonymity to describe party thinking.
Permanently extending the full spectrum of Bush tax cuts would add nearly $4 trillion to deficits over the next decade, according to the nonpartisan Congressional Budget Office. Obama's proposal to extend the cuts only on income of less than $250,000 a year would add more than $3 trillion to future deficits.
Eager to find a compromise short of full extension, administration officials began focusing more than a week ago on the concept of decoupling. Under the ideal scenario, House Democratic aides said, the middle-class cuts would be permanently extended, while the upper-income cuts would expire after just one or two years.
Senate Democrats also are considering tinkering with Obama's income threshold, with some pushing a plan to keep the tax cuts for families who earn up to $500,000 or even $1 million a year.
Congressional Republicans have been slow to embrace specific ideas but say they are keeping an open mind.
"I do sense some flexibility on the president's part, and we're happy to talk to him about it," Senate Minority Leader Mitch McConnell (R-Ky.) said Sunday on "Face the Nation."
Rep. Dave Camp (R-Mich.), who is in line to chair the tax-writing House Ways and Means Committee, said in an interview: "I think we need to be open to having these conversations and see where they lead. It's very important to address this before the end of the year."