Pending tax hikes cause Democratic tension 

With the Bush tax cuts set to expire in five months, congressional Democrats are at odds over whether to allow the increase with the economy still struggling.

Democratic lawmakers in both the House and Senate are advocating at least a temporary extension of the cuts for lower- and middle-income earners, who stand to see tax rates spike by up to 50 percent.

House Speaker Nancy Pelosi, D-Calif., and Treasury Secretary Timothy Geithner have both made clear they want tax cuts for the top income bracket to expire.

"My stance is that the Bush-era tax cuts contributed to the deficit, did not create any jobs, and that they should be repealed," Pelosi told reporters.

But some Democrats believe the cuts should also be continued for those in the highest tax bracket, and they are hoping they can convince reluctant Democratic leaders to reconsider their plan to exclude an extension for the wealthy.

If the cuts are left to expire, those earning more than $250,000 would see their taxes jump from 35 percent to 39.6 percent, which some economists say could threaten the recovery by triggering in a drop in spending.

"The top five percent income bracket in this country accounts for 30 percent of all consumer spending," said Rep. Gerry Connolly, D-Va., who represents wealthy Fairfax County. "So, if they are worried about the economic recovery, this is not the time to raise taxes on them."

In the Senate, Budget Committee Chairman Kent Conrad, D-N.D., is advocating for a tax increase reprieve for the wealthy that would last one or two years.

Conrad told reporters last week that the tax rates should be left alone for every income level "until the recovery is on more solid ground."

For most House and Senate Democrats, however, there is little agreement about how to handle the expiring Bush tax cuts, with many lawmakers saying they are undecided.

If left in place, the cuts will cost the treasury $3 trillion over the next decade, a potentially critical source of revenue as lawmakers work to close a $1.3 trillion budget deficit.

"We need the revenue right now," said Sen. Mark Pryor, D-Ark. "We have a $13 trillion national debt and we can't pretend like the revenue part of that is not part of the solution here. We have to be honest about that with the American people."

Pryor, however, is not necessarily willing to raise taxes on everyone.

"I'm open to maybe letting some expire, but not others," he said.

Part of the debate over the Bush tax cuts is whether they should be paid for if Congress votes to extend them.

Democrats say the tax cuts should not add to the deficit, while most Republicans say tax cuts don't count as true spending.

"It sounds to me a little ridiculous that if you want to keep taxes just the way they have been for the last 10 years, you have to have an offset for it," said Sen. Charles Grassley, R-Iowa, the top Republican on the Senate Finance Committee.

But Sen. George Voinovich, R-Ohio, told The Washington Examiner the tax cuts should be paid for and applied to all income brackets.

"Either you pay for them, or you don't do them," he said.

sferrechio@washingtonexaminer.com

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