Levin wants to extend some Bush tax cuts before August recess

Ways and Means Committee Chairman Sandy Levin (D-Mich.) would like to extend at least some of the tax cuts enacted under President George W. Bush before lawmakers adjourn for the August recess. 

“I think it is preferable,” he told reporters Thursday. 

The Bush tax cuts are largely set to expire at the end of the year, but Democrats want to extend the rates for the middle class. They don’t intend to extend cuts to wealthier taxpayers who make at least $250,000 in annual income.

“The one thing we will not extend are those taxes on folks making over $250 [thousand]; we’re not going to extend that,” Rep. Bill Pascrell (D-N.J.), a Ways and Means member, told The Hill. “All others seem to be on the table.”

Much else remains uncertain, including how to handle taxes on investment income. Democrats themselves don’t appear to have decided how to address expiring rates on dividends and capital gains, partly because they don’t want to make changes to tax rates that could have an adverse impact on the economy.

At the same time, the record budget deficits make it difficult not to look for income from some taxpayers.

“You’re asking a question that remains to be discussed,” said Rep. Chris Van Hollen (D-Md.) when asked about dividends and capital gains taxes. Van Hollen is a Ways and Means member who also serves as Assistant to Speaker Nancy Pelosi (D-Calif.). 

Absent congressional action, the 15 percent tax on dividends resets in January to pre-2001 levels, when most payments were taxed at rates that topped out at 39.6 percent. The tax on capital gains is also set to increase next year, from 15 percent to roughly 24, when the Medicare surtax takes effect. 

“What we don’t want to do is send a message that we want to hurt business at a time when we need to support business,” Pascrell said. 

Extending the current tax rates on capital gains and dividends for wealthier people will require offsets. 

Lobbyists working the issue believe the challenge will be getting that extension through the Senate, but also say budget reconciliation instructions by Senate Budget Committee Chairman Kent Conrad (D-N.D.) leave some wiggle room for making it happen.

“Conrad’s budget is silent on tax rates for cap gains and dividends,” one lobbyist told The Hill. “With his reconciliation instructions, there is plenty of maneuvering room for the Finance Committee to do what they want with the upper-end taxpayers. So we don’t think Conrad’s budget is by any means determinative, and perhaps not even instructive as to what will happen with those rates.”