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Published: Monday, 11/15/2010

President opens door to tax-cut extension

WASHINGTON - President Obama said Sunday that he is committed to extending tax cuts for middle-class Americans by the end of the year.

He indicated he is willing to negotiate with Republicans on a possible extension for the country's highest earners.

"I believe it is a mistake for us to borrow $700 billion to make tax cuts permanent for millionaires and billionaires," the President told reporters aboard Air Force One as he returned from his 10-day trip to Asia.

"It won't significantly boost the economy, and it's hugely expensive, so we can't afford it."

But he acknowledged that Republicans have "some strong feelings" about making the tax cuts for the wealthy permanent.

"If they feel very strongly about it, then I want to get a sense of … how they intend to pay for it," Mr. Obama said.

Top White House adviser David Axelrod, appearing on two television talk shows Sunday, was silent on the possibility of extending current tax rates for the short term.

He said he wants to leave negotiations to Mr. Obama and members of Congress.

"The bottom line is he wants to sit down and talk about this," Mr. Axelrod said.

"There is no bend on the permanent extension of tax cuts for the wealthiest Americans," he declared.

A compromise would put off fundamental questions about taxes for the time being, virtually guaranteeing their prominence as a campaign issue for the 2012 presidential election.

Today Congress returns with Democrats in control of the House and Senate for a lame-duck session that is expected to stretch into December.

But Republican votes are essential, and the GOP has additional leverage because it will begin the new year with Republicans in charge of the House and with added members in the Senate.

Senate Minority Leader Mitch McConnell has introduced legislation that would extend the tax rates permanently.

But Sunday he signaled an openness to negotiate.

"I'm willing to listen to what the President has in mind for protecting Americans from tax increases," Mr. McConnell (R., Ky.) said.

Two prominent Republicans conceded that the best Congress might be able to accomplish in the coming weeks is a short term-continuation of the current tax rates, set under President George W. Bush in 2001 and 2003.

"If the President wants to compromise on a two or three-year extension … if that's all we can get out of the President, and he is the President, so we'll work with him on that," said Sen. Jim DeMint, a South Carolina Republican and a leader of his party's conservative wing.

Likewise, Sen. John McCain of Arizona, the Republican presidential nominee in 2008, said he could fathom a short-term extension of all the tax cuts.

"They should be extended until we are out of this recession," Mr. McCain said.

He voted against the substantial income tax cuts enacted under President George W. Bush, saying they disproportionately benefited wealthy Americans and did not rein in spending.

The recession technically ended in June, 2009, but the recovery has been markedly slow and sputtering, with unemployment stuck at 9.6 percent.

Mr. Obama will put his bargaining skills to the test this week at a White House meeting and dinner with a bipartisan group of congressional leaders. It will include the likely next House speaker, Rep. John Boehner (R., Ohio), and Mr. McConnell.

Mr. Obama said he expects the meeting to be a constructive conversation to map out the legislative agenda for the lame duck session of Congress.

"There are going to be some disagreements, there may be some need for compromise, but we should be able at least to get through the lame duck making sure that taxes don't go up for middle-class families starting Jan. 1, that some of the key business provisions that can assure economic growth get done," Mr. Obama said.

Democrats will be looking for his signal on how to proceed on tax rate extensions.

Some Senate Democrats already have been laying down their markers, however.

Sen. Chuck Schumer (D., N.Y.) argued for current tax rates to be extended for all taxpayers except those making more than $1 million.

He said such a limit would ensure that tax rates would remain the same for the middle class and "virtually all small businesses."

Sen. Mark Warner, a moderate Virginia Democrat and a former entrepreneur who is worth millions of dollars, has proposed letting current tax rates expire for the top 2 percent of earners and enacting targeted business tax cuts.

Former Federal Reserve Chairman Alan Greenspan said he expects Mr. Obama will extend the tax cuts in the lame-duck session of Congress.

"That's the easiest thing to do politically at this time," Mr. Greenspan said on Meet the Press.

Mr. Axelrod appeared on Fox News Sunday and NBC's Meet the Press. Mr McCain appeared on NBC and Mr. DeMint on Fox. Mr. Schumer spoke on CBS' Face the Nation. Mr. Warner appeared on CNN.



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