Congress holds off on tax is­sue

The mat­ter of ex­tend­ing Bush-era breaks is shifted to the cam­paign trail.

Los Angeles Times - - The Nation - Lisa Mas­caro re­port­ing from washington

Congress pre­pared to leave town with­out vot­ing Wed­nes­day to ex­tend the Ge­orge W. Bush-era tax cuts, choos­ing to shift the fight over one of the year’s biggest par­ti­san bat­tles from the halls of the Capi­tol to the cam­paign trail.

Both Democrats and Repub­li­cans see po­ten­tial po­lit­i­cal gains in car­ry­ing the tax fight to their home states, bank­ing on their abil­ity to con­vince vot­ers that the other side is to blame for the im­passe. Congress is ex­pected to put the is­sue to a vote in the post-elec­tion lame-duck ses­sion.

The de­ci­sion in­tro­duces a fiery is­sue into an elec­tion in which con­trol of the House and pos­si­bly the Se­nate are in the bal­ance. What hap­pens to the $3.7-tril­lion tax pack­age will touch the pock­et­book of al­most ev­ery voter. It also has ma­jor im­pli­ca­tions for the fed­eral bud­get and U.S. econ­omy in the re­main­der of Pres­i­dent Obama’s first term.

Democrats sup­port ex­tend­ing the tax cuts to all but top earn­ers — in­di­vid­u­als mak­ing $200,000 or more and fam­i­lies earn­ing $250,000 or more per year, for whom they fa­vor let­ting the Bush cuts end. Un­less Congress acts, all the tax cuts will lapse at year’s end.

Repub­li­cans fa­vor ex­tend­ing all of them, ar­gu­ing that tax cuts for wealth­ier Amer­i­cans would help busi­nesses ex­pand and cre­ate jobs.

Be­yond the mer­its of the ar­gu­ments in purely eco­nomic terms, what is clear is that vot­ers who are fo­cused on pock­et­book is­sues this cam­paign sea­son will be of­fered two dis­tinct views on the tax-cut de­bate.

“We’re glad to fight that fight,” said Rep. San­der M. Levin (D-Mich.).

As the tax cuts loomed large over the fi­nal days of con­gres­sional de­bate, both the House and Se­nate con­ducted a flurry of votes even though Democrats and Repub­li­cans were anx­ious to leave Washington for the cam­paign sea­son.

Congress was on track to reach an agree­ment to keep the govern­ment run­ning by ap­prov­ing a stop­gap spend­ing bill called a con­tin­u­ing res­o­lu­tion that would hew to 2010 spend­ing lev­els. The res­o­lu­tion was needed be­cause Congress had failed to pass any of its an­nual ap­pro­pri­a­tions bills.

Both the House and Se­nate also con­ducted a se­ries of votes this week on core is­sues de­signed to un­der­score Demo­cratic pri­or­i­ties, even though the bills had lit­tle chance at fi­nal pas­sage be­fore the midterm elec­tion.

The House passed leg­is­la­tion Wed­nes­day to fund a new health pro­gram for re­spon­ders and com­mu­nity mem­bers in­jured in the Sept. 11, 2001, ter­ror­ist attacks in New York, and to re­open the fed­eral vic­tims’ com­pen­sa­tion fund. The bill has not passed the Se­nate.

As a last ef­fort to ad­dress the nation’s stub­born un­em­ploy­ment rate and pro­mote jobs, the Se­nate voted on an out­sourc­ing bill that of­fered a pay­roll tax hol­i­day to firms bring­ing over­seas jobs back to the United States, and im­posed tax penal­ties on those that ship jobs over­seas.

The out­sourc­ing bill failed largely on party lines, with some Demo­cratic dis­sent, in what Se­nate Mi­nor­ity Leader Mitch McCon­nell (R-Ky.) called “about as pure a po­lit­i­cal ex­er­cise as you can get.”

As the tax-cut de­bate hangs over the po­lit­i­cal sea­son, both sides of­fered a glimpse of the ar­gu­ments as they pre­pared to make the case to vot­ers.

“It’s ir­re­spon­si­ble for them to leave town,” said House Mi­nor­ity Leader John A. Boehner (R-Ohio), as Democrats made it clear they would not be bring­ing the is­sue to the floor. “This is no way to run the peo­ple’s House.”

Many econ­o­mists say that as the econ­omy con­tin­ues to strug­gle, it would be un­wise to raise taxes on the mid­dle class. They give cre­dence to the pro­posal from Obama and Democrats to ex­tend tax cuts for those mak­ing less than $200,000 and fam­i­lies mak­ing $250,000, de­spite the $3-tril­lion cost.

But econ­o­mists are split over ex­tend­ing $700 bil­lion in tax breaks for the wealthy, as the GOP wants to do.

Mark Zandi, chief econ­o­mist at Moody’s econ­omy.com, has ar­gued for phas­ing out the tax break for the wealthy, but not un­til af­ter 2011.

Stud­ies from the Tax Pol­icy Cen­ter show just 3.2% of all Amer­i­can tax­pay­ers earn more than the $200,000 cut­off.

Democrats pledged to re­solve the is­sue dur­ing a lame-duck ses­sion of Congress sched­uled for af­ter the elec­tion, even as there is dis­sent in their ranks.

Democrats chose to let their can­di­dates craft their own mes­sage on the trail, free from a vote that would lock in their po­si­tion. Dozens of House Democrats pressed Speaker Nancy Pelosi for a floor vote while oth­ers pre­ferred not to sad­dle them­selves with a de­ci­sion be­fore the elec­tion.

Se­nate Democrats de­clined to take up the is­sue in the face of Repub­li­can vows to block any vote that did not in­clude tax cuts for the wealthy and dis­sent among Democrats, in­clud­ing Sen. Ben Nel­son (D-Neb.). He de­liv­ered a speech Wed­nes­day at the con­ser­va­tive Her­itage Foun­da­tion in which he ar­gued for ex­tend­ing the tax cuts for the wealthy de­spite the cost to the deficit.

lisa.mas­caro@latimes.com

Alex Wong

REPUB­LI­CANS: House Mi­nor­ity Leader John A. Boehner, right, with Reps. Cathy McMor­ris Rodgers and Kevin McCarthy, calls the de­lay “ir­re­spon­si­ble.”

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