Democrats take a hard line on taxes

Posted: July 18, 2012

WASHINGTON - Democrats are going all-in in a fiscal game of chicken, saying they will let everyone's income taxes rise Jan. 1 and slash defense spending amid unemployment of more than 8 percent if Republicans continue to balk at raising taxes only on those making more than $250,000 a year.

The firm stance is being adopted as President Obama and Congress come to grips with the possibility that gridlock and stalemate will result in the government careening off a fiscal cliff in January with automatic tax increases, spending cuts, and an approaching exhaustion of borrowing ability.

"If we can't get a good deal, a balanced deal that calls on the wealthy to pay their fair share, then I will absolutely continue this debate into 2013 rather than lock in a long-term deal this year that throws middle-class families under the bus," Sen. Patty Murray (D., Wash.) said in a speech Monday.

Her comments were the latest in an almost daily back-and-forth between top Republicans and Democrats over the one-two punch facing the economy in January: expiration of the Bush tax cuts and the imposition of $110 billion in automatic spending cuts, half coming from defense.

"They're ready and willing to go right off the fiscal cliff if they don't get their way," said Senate Minority Leader Mitch McConnell (R., Ky.). "Because they think it will make it likelier they'll get their way."

McConnell was an architect of the automatic spending cuts, which were designed to prod a deficit-reduction supercommittee to reach an agreement. The supercommittee failed and the idea of automatic cuts is now unpopular.

The gamesmanship also includes votes in the Republican-controlled House and Democratic-run Senate over the next two weeks on competing one-year extensions of former President George Bush's 2001 and 2003 tax cuts. The GOP version would extend the full range of the Bush tax cuts.

A plan circulated Monday by Senate Democrats would keep income tax rates where they currently are for families earning below $250,000 a year and individuals making less than $200,000, as Obama has proposed. But the tax cuts enacted a decade ago on income above those limits would expire, with the top income tax bracket rising to 39.6 percent.

Democrats are bolstered by opinion polls that show voters favor increasing taxes on the wealthy. But they also risk sharing the blame for a broader tax increase and sudden spending cuts that economists including Congressional Budget Office Director Doug Elmendorf say would probably throw the economy back into recession next year.

It's a risk they seem willing to take so far.

"If middle-class families start seeing more money coming out of their paychecks next year, are Republicans really going to stand up and fight for new tax cuts for the rich?" Murray said. "I think they know this would be an untenable political position."

comments powered by Disqus