Congressional Republicans floated a deal Wednesday that would extend the Bush-era tax cuts through the end of 2013, which they said would give Congress and whoever occupies the White House next year a chance to work on a total overhaul of the tax code.
The move is a counteroffer to Mr. Obama and congressional Democrats who are pushing strenuously for taxes to rise on the wealthy next year, saying fairness and the government’s poor fiscal situation are reasons why some taxpayers must give more.
But faced with last week’s grim unemployment news, Republicans said the economy isn’t strong enough to handle a major tax increase on anyone, including the wealthy whose investment decisions can affect the economy as a whole.
“It’s pretty obvious the economy needs the certainty of the extension of the current tax rates for at least a year,” said Senate Minority Leader Mitch McConnell, Kentucky Republican. “That would also give us the time to begin to grapple with something we all agree we need to do on a bipartisan basis, which is to reform the whole tax code.”
The White House seemed in no mood to deal, and spent Wednesday trying to contain the damage done earlier this week when former President Bill Clinton told CNBC that he thought all of the tax rates should be extended at least temporarily because of the weak economy and because Republicans wouldn’t accept anything less.
Mr. Clinton’s spokesman later issued a statement walking back those comments and saying the former president agreed with Mr. Obama on the need to raise some tax rates.
“There’s no daylight between President Clinton and President Obama when it comes to … the need to extend the tax cuts for middle-class Americans and to not extend tax cuts for those making over $250,000,” White House press secretary Jay Carney told reporters in a testy exchange aboard Air Force One.
Complicating matters is House Minority Leader Nancy Pelosi, California Democrat, who last month floated her own compromise that would raise income tax rates only on those making at least $1 million.
She said she was trying to seek some middle ground that would guarantee tax cuts for middle-class families while winning at least some tax increases on the wealthy, but her plan was panned by liberal groups who said it didn’t raise enough money.
Mrs. Pelosi on Wednesday called on House Republicans to cancel their scheduled weeklong vacation next week and stay in town to work on tax legislation.
In 2010, Mr. Obama and Mr. McConnell agreed to a two-year extension of the Bush-era income tax and investment tax rate cuts, as part of a broader package that also included extended unemployment benefits. None of the new spending nor the loss of revenue was offset by cuts elsewhere, which deepened the deficit.
At the time, Mr. Obama said he agreed to the deal because the economy was too weak to handle major tax increases.
Mr. McConnell said Wednesday that the economy’s growth rate is slower now than it was in 2010, which he said should prompt Democrats to take the GOP’s offer.
But the government’s debt picture is also substantially worse now than it was in 2010.
The Congressional Budget Office has issued several warnings that the government can’t keep adding spending and cutting revenue. Still, it said allowing the tax rates to rise and the scheduled spending cuts to take effect at the end of this year would plunge the country into the second trough of a double-dip recession.
That leaves members of Congress weighing short-term pain and long-term gain, versus their own election prospects in November.
Republican leaders’ desire for a short-term tax extension doesn’t necessarily sit well with the business owners Republicans say they’re trying to protect.
On a conference call with small-business owners Wednesday, one of them asked Mitt Romney, the presumptive Republican presidential nominee, for certainty “so we’re not constantly looking over our shoulder and just saying, ’Well, next year we don’t know what’s going to happen.’ “
Mr. Romney said he would try for the kind of broad overhaul congressional Republicans are touting.
He even praised the Bowles-Simpson commission, which produced a bipartisan report in 2010 arguing for lowering the tax rates while eliminating special tax breaks, which the commissioners said would raise money to lower the deficit.
He said his plan for corporate and individual taxes would lower the rates but get rid of many loopholes, deductions and exemptions, with the goal of making the wealthy continue to pay the same share of the federal total tax burden.
“Whether it’s, you know, the 1 percent or a half a percent or 2 percent or however you want to call it, the wealthiest will pay the same share of the taxes they pay today after the tax reform,” he said. “I’m not looking to reduce the burden paid by the very wealthiest.”
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
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