Momentum builds for extending all of President Bush’s tax cuts

Momentum built Thursday for extending all of the Bush-era tax cuts after President Obama avoided a veto threat and a key Senate Democrat voiced support for the extension.

Sen. Ben Nelson (Neb.), a centrist who has been a key vote on several Obama administration initiatives, said Thursday he supports extending all of the George W. Bush-era tax cuts until the economic recovery has taken root. Raising taxes on wealthier taxpayers could hurt the economy, he said.

“I support extending all of the expiring tax cuts until Nebraska’s and the nation’s economy is in better shape, and perhaps longer, because raising taxes in a weak economy could impair recovery,” Nelson said in a statement Thursday.

Earlier in the day, Obama refrained from promising to veto legislation that extends tax cuts not only for the middle class, but also for individuals with incomes of more than $200,000 and families with incomes of more than $250,000.

Pressed on the issue during an interview on ABC’s “Good Morning America,” Obama restated his opposition to extending low tax rates for wealthier taxpayers, but stopped well short of a veto threat.

“What I am saying is that if we are going to add to our deficit by $35 billion, $95 billion, $100 billion, $700 billion, if that’s the Republican agenda, then I’ve got a whole bunch of better ways to spend that money,” he said.

Asked about Obama’s comments, White House press secretary Robert Gibbs insisted Thursday that legislation extending the tax cuts for wealthier taxpayers will not reach Obama’s desk. 

Yet it seems quite possible that doubts about raising taxes on anyone this fall could lead to a compromise in which Congress would vote to extend all of the tax cuts. 

Tax experts increasingly see this as the most likely scenario, probably in a lame-duck session after the elections.

“My guess is a lame-duck,” Clint Stretch, managing principal for tax policy at Deloitte Tax, said Thursday. He expects Congress to pass a one- or two-year extension of all of the tax rates after the election.

Stretch said it would be politically impossible for Obama to agree to such a deal before the election, because he campaigned on ending the low tax rates for wealthier taxpayers. Reversing himself now would further antagonize Obama’s liberal political base, which is already disappointed with the administration on a range of issues, Stretch said.

House Minority Leader John Boehner (R-Ohio) on Wednesday voiced support for a two-year extension of all of the tax rates, which would set up another decision on tax policy in 2012, a presidential-election year.

Moody’s Analytics Chief Economist Mark Zandi has called on Congress to extend all of the tax cuts for a year, and former Obama budget director Peter Orszag this week said all of the tax cuts should be extended for two years as part of a compromise. In a column in The New York Times, Orszag wrote that Congress should then end all of the Bush-era tax cuts.

The Hill reported in July that House and Senate Democrats were mulling an extension of all of the tax cuts given the economic slowdown and a tough election cycle for their party.
Sen. Kent Conrad (D-N.D.), who sits on the Senate Finance and Budget panels, previously suggested all of the tax rates should be extended.

Senate Democrats would need all 59 Democrats and at least one Republican to pass the Obama administration’s plan to extend tax cuts for the middle class while allowing the tax breaks for the highest-income tax brackets to expire.

That plan could be a non-starter in the Senate without Nelson’s support, because another GOP vote would be needed for passage.

“Continuing all of the tax cuts could provide certainty for families and businesses in Nebraska and nationwide,” Nelson said. “Today, many businesses are sitting on cash because of uncertainty, which is holding back economic development across America.”

While deficit spending for the economic stimulus passed in 2009 was necessary, Nelson said, he’d “like to see these tax cuts paid for as much as possible.”

“We need to focus on reducing government spending and finding offsets, where we can, because that’s the fiscally responsible thing to do,” he said.

Extending tax cuts for top earners would cost $700 billion over 10 years, according to the Congressional Budget Office.

This story was posted at 11:32 a.m. and updated at 12:45 p.m. and 4:14 p.m.