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Democrats warm to tax-cut compromise

By Lori Montgomery
Washington Post Staff Writer
Monday, November 29, 2010; A13

A faction of congressional Democrats is making a push to persuade President Obama to consider a compromise on tax policy that would leave only the nation's 315,000 richest households facing higher taxes in January.

Over the past few days, a growing number of lawmakers have publicly embraced the idea of extending expiring tax cuts for families making as much as $1 million a year. They include newly elected Sen. Joe Manchin (D-W.Va.), Sen. Robert Menendez (D-N.J.) and Sen. Claire McCaskill (D-Mo.), who argued on "Fox News Sunday" that "we should draw the line in the sand for millionaires."

The idea's chief proponent, Sen. Charles E. Schumer (D-N.Y.), said that raising the income threshold from $250,000, as Obama has proposed, has the potential to unite fractious Democrats behind a single strategy on the tax cuts, which are set to expire Dec. 31 unless Congress acts.

Schumer also said the higher threshold would make it far more difficult for Republicans to say no.

"There's a strong view in the caucus that if we make the dividing line $1 million, it becomes a very simple argument: We are for giving the middle class a tax break; they're for tax cuts for millionaires," Schumer said Sunday. At $250,000, the message is "too muddled," he said. "It's much clearer at $1 million. It unites our base and the independent voters we lost in this election."

The campaign comes as Obama is preparing to host a high-stakes meeting on taxes and other issues Tuesday morning with congressional leaders from both parties - the first such gathering since Republicans hammered Democrats at the polls earlier this month. Republicans are insisting on extending the cuts at all levels, and the coming battle over taxes will be the first test of the new balance of power in Washington.

On Sunday, Senate Minority Leader Mitch McConnell (R-Ky.) flatly rejected the $1 million threshold, arguing that "Republicans and a growing chorus of Democrats believe that raising taxes is a horrible idea" in the midst of a fragile recovery, no matter who is targeted.

"With millions of people out of work, Americans expect lawmakers to make economic policy based on what's good for the economy, not what sounds best in a focus group," McConnell said in a statement, adding that "it's not too late for both parties to work together."

Administration officials also are skeptical of the $1 million proposal, which would mark a shift in the position Obama has staked out since the presidential campaign, when he promised not to raise taxes for the middle class. The administration defined that group as families earning as much as $250,000 a year and individuals earning as much as $200,000.

Obama has vowed to let the cuts expire for higher earners, arguing that the nation cannot afford $700 billion over the next decade on tax cuts for the wealthy. Raising the threshold to $1 million would cut that to less than $400 billion through 2020, according to Treasury Department estimates.

After the election, Obama signaled that he would be open to a compromise with Republicans that would extend all the tax cuts temporarily; a period as long as three years is under discussion.

On Sunday, Sen. Richard J. Durbin (D-Ill.), a close ally of the president and the Senate's No. 2 Democrat, said the debate should be expanded to include extension of emergency jobless benefits, which expires Nov. 30, as well as Obama's "Making Work Pay" tax credit, which expires Dec. 31.

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