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Democrats Divided on Extending Bush Tax Cuts

Four Senate Democrats break ranks. Will more follow?

12:00 AM, Aug 4, 2010 • By JOHN MCCORMACK and MICHAEL WARREN
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On Tuesday, Connecticut senator Joe Lieberman called for a temporary extension of the Bush tax cuts, which are set to expire at the end of the year. "I’m hesitant to see taxes go up in the middle of a recession," Lieberman, an independent who caucuses with the Democrats, told reporters at the Capitol. "I think we ought to wait til maybe six months, maybe at least til the end of the next fiscal year" to raise taxes.

Democrats Divided on Extending Bush Tax Cuts

"I’m afraid if we raise taxes, including on higher income people, it will have a bad effect on our economy," Liberman added. "If we raise their taxes, they’re going to spend less." Democratic senators Ben Nelson (Neb.), Evan Bayh (Ind.), and Kent Conrad (N.D.) have all similarly expressed support for extending the tax cuts.

Leading Democrats had hoped to use the debate over the Bush tax cuts to their advantage. "We like this argument," White House Chief of Staff Rahm Emanuel told Bloomberg this week. "We stand for middle-class tax cuts; the Republicans are willing to hold that hostage on behalf of the top 2 percent." But increasingly it's the Democrats who seem to be divided on the way forward.

Senate Democrats hashed out their differences on the tax cuts Tuesday at their weekly policy luncheon but did not reach a consensus. "We’re looking at a lot of different options," Missouri senator Claire McCaskill told THE WEEKLY STANDARD, "and I’m not as prepared to discuss it right now 'cause we just spent a half hour on it, and I want to go into just all the different options that have been presented."

But Senator Barbara Boxer of California said she had it on good authority that the wealthy are just fine with a tax increase. "People who earned a million dollars a year, they’re doing just fine," Boxer told TWS. "They’ve told me they’re very willing to go back to the Bush One tax cuts."

For individuals earning more than $200,000 per year and couples earning more than $250,000, the White House's plan would raise the highest marginal tax rate from 35 percent to 39.6 percent--the top tax rate under Bill Clinton (the top tax rate under George H.W. Bush was 31 percent). The capital gains tax would also increase to 20 percent for high earners under the White House's plan.

"We’re going to have to start becoming serious about balancing this deficit," said Minnesota's Amy Klobuchar. "All we’re talking about is putting the wealthiest people making over, you know, $250,000 a year to put them back to where they were at the Clinton levels, and times were pretty good then."

Klobuchar's concern about the deficit was echoed by Colorado's Mark Udall and Arkansas's Mark Pryor, who both oppose extending the Bush tax cuts to the highest earners. "This has to be tied to the work we’re gonna do to bring our deficits down annually and begin to drawdown the overall debt, which isn’t sustainable," said Udall.

"I think we need to do the middle class tax extension and then I think we ought to do something on the estate tax to give them some certainty there," Pryor told TWS. "I would say we didn’t reach any real conclusions today, but it was good to talk about it."

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