Election Fight

07.10.12

Obama Plan to Extend Bush Tax Cuts for Middle Class Is Dead on Arrival

Everyone knows the president’s middle-income tax proposal will never make it through the House—and that’s just fine with lawmakers on both sides of the aisle. Patricia Murphy on why now is the perfect time for the tax debate.

Next stop for Obama’s tax plan? The GOP garbage can.

Two hours before President Obama stood in the East Room of the White House to call for an extension of the Bush tax cuts for middle-income Americans, House Speaker John Boehner fired off a statement panning the idea and declaring Obama “asleep at the switch” of the American economy.

Boehner’s prebuttal confirmed what everybody in Washington, including the president, already knew—that Obama’s pitch for half a loaf of Bush tax-cut extensions is going absolutely nowhere on Capitol Hill as long as the GOP runs the House. Indeed, that was the point of the whole exercise on both sides of the aisle: to remind voters of what is at stake in the November elections.

For Americans watching from outside the Beltway, proposing an idea that everyone knows is doomed might seem like a colossal waste of time at best and an example of Washington gridlock run amok at worst. But for Democrats and Republicans in the nation’s capital, the president’s go-nowhere proposal is just the opposite—a chance to have exactly the right debate at exactly the right time.

The tax debate “is more important now than before because voters are starting to pay attention,” says Ron Bonjean, a Washington consultant and former adviser for the Republican House and Senate leadership.

Bonjean said upcoming votes on the Bush tax cuts can and likely will be used against Democrats in campaign commercials and on the trail leading up to the November elections. Republican candidates, he said, have nothing to lose if they frame their no-new-taxes position as fighting for small businesses that could get hit by the higher tax rates under Obama’s proposal.

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Obama on the healthcare victory.

“There is no downside to them to support extending the tax cuts,” Bonjean said. Democrats, on the other hand, could have a tougher hand to play: “Saying, ‘The economy is bad, so let’s raise taxes’ in the last few months of the campaign, that’s not a message that’s going to work.”

Not surprisingly, Democrats in the White House and on Capitol Hill see the tax battle very differently. But they are just as eager as Republicans to have the fight in front of voters.

“Republicans have failed to put forward a plan to create jobs or end the outsourcing of American jobs and continue to waste valuable time on bills to nowhere,” Democratic leader Nancy Pelosi said in a statement. “We must work together to extend tax cuts for the middle class, put people to work, and grow our economy.”

“Republicans are so clearly on the wrong side of every single poll. They are so transparently only interested in tax cuts for millionaires and billionaires.”

A Democratic leadership aide put it more bluntly: “This is an easy debate for us. Republicans are so clearly on the wrong side of every single poll. They are so transparently only interested in tax cuts for millionaires and billionaires.”

A number of polls, including Gallup’s most recent survey on the tax issue, supports Democrats’ confidence in pushing their position to extend the tax cuts only up to $250,000. In the Gallup poll, 62 percent of respondents said upper-income Americans are “not paying their fair share,” while just 25 percent said the top earners are “taxed about right.”

Gallup editors noted that that Republicans’ efforts to extend the tax cuts for all Americans could be especially dangerous if they are seen fighting for wealthy Americans at the expense of the middle class, a risk that GOP aides say they are well aware of. They say privately that that distinction is the driving force behind their message that Republicans are fighting for small businesses that would get hit under the Obama proposal, not for the billionaires in the same position.

In his remarks Monday, Obama said he will sign a tax-cut bill as soon as Congress sends it to him. But House and Senate leaders have no plans to negotiate a real agreement before Election Day on Nov. 6. Instead, both parties will vote on separate proposals that the other side says it will quickly reject.

Republican aides told The Daily Beast that the House will vote in a one-year extension of all of the Bush tax cuts before the end of the month, along with instructions for Congress to reform the entire tax code. Democratic Senate aides say the Senate also will vote to extend the Bush tax cuts before August, but will only consider the president’s proposal to extend the cuts for incomes of $250,000 and below.

In the meantime, all of the Bush tax cuts, for all Americans, are scheduled to expire on Jan. 1, 2013, along with the temporary 2-point cut to the payroll tax, which will expire on the same day. Combined, the tax increases would be a multitrillion-dollar hit to Americans’ incomes, but at the moment, no one in Washington is talking about that.