WASHINGTON - Democrats in Congress are poised to play a leading role this month in thwarting their party's effort to raise income-tax rates on the wealthy.
Tax cuts enacted in 2001 and 2003 expire at the end of this year. President Obama and Democratic congressional leaders have been eager to extend the breaks for individuals who earn less than $200,000 a year and joint filers who earn less than $250,000. Those earning more would pay higher, pre-2001 rates starting in 2011.
However, a small but growing number of moderate Democrats are balking at boosting taxes on the rich. Many face electorates that recoil at the mention of any tax increase. Some represent areas loaded with wealthier taxpayers. Further, some senators who don't face voters this fall are reluctant to increase taxes on anyone while the economy remains sluggish.
Without their support, the push to raise rates on the rich will probably fail.
"The economy is very weak right now," said Sen. Evan Bayh (D., Ind.), who isn't seeking reelection. "Raising taxes will lower consumer demand at a time when we want people putting more money into the economy."
Democratic leaders still vow a big effort this month to boost the top tax brackets, now 33 and 35 percent, back to 36 and 39.6 percent, the rates in effect in the 1990s. Both House Speaker Nancy Pelosi (D., Calif.) and Senate Majority Leader Harry Reid (D., Nev.), who faces a tough reelection fight, want a vote before the Nov. 2 election.
"We still expect to have a bill on the floor at some point in September," Reid spokesman Jim Manley said. "Whether Republicans will allow us to pass anything is a whole other story."
Pelosi spokesman Brendan Daly said Pelosi and Obama "have been clear they want to extend the middle-class tax cuts because they have the greatest economic benefit."
Many Democrats and Republicans are eager for a tax-cut battle, seeing it as emblematic of each party's economic principles.
"Now the administration is calling for a massive tax hike on small businesses in the middle of a recession," said Senate Minority Leader Mitch McConnell (R., Ky.), who maintains that higher rates on the wealthy would hit small business hard - a point the Obama administration disputes.
"So it's no surprise," McConnell added, "that most Americans think the country is on the wrong track and that Democrat policies have failed to do anything to fix their top concern, the economy."
