Tax Cuts Divide Democrats

Tax Cuts Divide Democrats Before Midterm Elections

(Bloomberg) — Democrats worried about defending congressional majorities and divided over extending income-tax cuts are delaying a vote on the issue until after Election Day.

Party strategists warn they are missing an opportunity to define themselves against Republicans.

After Senate Democrats postponed action on President Barack Obama's proposal to extend middle-class tax cuts until after the Nov. 2 election, a member of House Speaker Nancy Pelosi's leadership team announced today that chamber also will not vote this week.

"We'll have to get this done later this year," said Representative Chris Van Hollen of Maryland. "But we will get middle-class tax relief done, for sure, 100 percent."

Many Democrats have been nervous about a tax vote becoming a campaign issue. Still, Democratic consultants such as Bill Carrick say the party is missing an opportunity to draw a clear line between the parties, with Republicans holding out for tax relief for higher-income Americans and most Democrats siding with keeping the tax cuts only for the middle-class.

"A lot of folks are worried, particularly Democrats in swing districts, that somebody is going to say they voted to raise taxes" if they don't support cuts for all income levels, Carrick said. "The blunt instrument of a 30-second campaign spot makes people get scared" of Republican attack ads, he said.

Expiring Dec. 31

Income-tax cuts enacted under former President George W.

Bush are set to expire Dec. 31. Obama and most Democrats favor extending them for individuals earning up to $200,000 a year and couples earning up to $250,000 and allowing reductions for higher-income Americans to lapse. They say the U.S. can't afford tax cuts for top earners amid record budget deficits.

Republicans and some Democrats want to extend the tax cuts for all income levels, arguing that letting taxes go up for the top earners would hurt job-creation. At least five Democrats in the Senate and 40 of 41 Republicans say lower rates should be extended across-the-board; Republican George Voinovich of Ohio has said he won't vote to extend any tax cuts that aren't paid for. In the House, 31 Democrats have spoken in favor of keeping all the tax cuts, the position the Republican leadership takes.

House Republicans today challenged Democrats to allow a vote on extending all the tax cuts, arguing that inaction perpetuates business uncertainty that is stifling job growth.

'Irresponsible'

"It's irresponsible for them to leave town without giving us a fair, up-or-down vote," House Minority Leader John Boehner of Ohio told reporters.

The National Republican Congressional Committee went on the attack after today's announcement by Van Hollen. In a press release, the committee said Georgia Democratic Representative Sanford Bishop is "ready to bolt without calling for an open and fair debate" on the tax cuts.

Bishop is one of the 31 Democrats who back a short-term extension of all tax cuts. Spokesman Ashton McRae said in an e- mail that while Bishop "would have preferred" a vote this week, it was apparent that leaders couldn't agree on how to proceed.

Last week, Pelosi suggested members might vote on middle-class tax cuts this week before leaving Washington to campaign.

Two days later, House Majority Leader Steny Hoyer said that would be a "specious act" without the chance of a Senate vote.

Pelosi favored a vote this week to sharpen the contrast between Democrats and Republicans, said leadership aides who spoke on condition of anonymity. Her supporters said it would let Democrats draw distinctions with Republicans not just on taxation but also on which party would do more to cut the deficit and which party supports the most well-off people.

Individual Democrat's View

An individual Democrat's view on whether to vote on taxes before the election "depends on what state or district you happen to be from," said Indiana Senator Evan Bayh, a Democrat who decided not to seek re-election this yearThere are some people who come from very liberal districts who want to send a message that they're not for extending tax cuts, particularly for people who have been successful," Bayh said in an interview. "Then there's some others who come from more conservative places" who want "to extend the tax cuts."

Carrick said Pelosi's strategy would force Republicans to choose between extending only middle-class tax cuts and insisting on tax relief also for the most well-off Americans.

"It's better to do something edgy and take a little risk and try to avert getting really clocked" in the election, Carrick said.

'Missed Opportunity'

Failure to vote on tax cuts this week would be a "missed opportunity" for Democrats, pollster John Anzalone said in a telephone interview. "The reality is that voters want to see whose side you're on, and this does it."

In a Sept. 15 memo to fellow Democrats, Anzalone cited a CBS-New York Times poll showing that 53 percent of voters favor letting the tax cuts for the wealthiest 2 percent of Americans expire. He cautioned that Democrats "must be exceedingly disciplined in their messaging" on the issue.

Party members were already disagreeing over tax cuts when Anzalone sent his memo. Thirty-one House Democrats led by Jim Matheson of Utah, Melissa Bean of Illinois and Glenn Nye of Virginia, who faces a close re-election fight, said in a Sept.

15 letter to Pelosi that raising "any taxes right now could negatively impact economic growth."

They urged a one-year extension of all the Bush-era tax cuts.

Tax on Dividends

In a letter this week, 47 House Democrats led by John Adler of New Jersey, also in a tough re-election contest, opposed Obama's proposal to raise the 15 percent tax rate on dividends and most capital gains for high-income Americans when the rate expires Dec. 31.

Asked yesterday about the internal debate, Hoyer told reporters that Pelosi and all Democrats "are in absolute agreement" that there will be no tax increase on the first $200,000 of all individuals' income and none "on the first $250,000 of every American family's income, period."

"That objective is being held hostage in the Senate" by Republicans, Hoyer said. "If we thought we could get it through the Senate, absolutely we would act and we might well act anyway" before Congress leaves Washington this week.

Senator Jay Rockefeller, a West Virginia Democrat, said it makes little difference whether Congress votes now or after the election.

"I am not sure that people would even know whether we did or didn't" vote to extend tax cuts because it would be drowned out in the heat of the campaign, Rockefeller said.

Political science professor Alan Abramowitz of Emory University in Atlanta said a pre-election vote on tax cuts "might make a marginal difference and help a few endangered Democrats."

Still, he said "nothing is going to make a big difference" because "the mood of the electorate is pretty negative" about the economy.

Rowley is a reporter for Bloomberg News. With assistance from Patrick O’Connor, Brian Faler and Laura Litvan in Washington.