Economy & Budget

Democrats Rebel Against President Obama’s Tax Hikes

A growing number of Democrats in Congress or running for open House and Senate seats are telling party leaders to extend the top income tax rate cuts that are due to expire at the end of this year.

The intraparty rebellion against a central Democratic campaign party
pledge in the 2008 presidential election is shaping up as an embarrassing rejection of President Obama’s plan to raise taxes on investors, small businesses and wealthier Americans makingover $250,000 a year.

At least two dozen Democratic lawmakers and candidates, and possibly a lot more as the week progresses, are telling House and Senate leaders and the White House that raising taxes when the economy is weakening, businesses are struggling, and job growth is slowing down will only make matters worse.

Despite a growing split within the Democrats’ rank and file as polls continue to suggest that Republicans are poised to take control of the House, and possibly the Senate, the White House and Democratic leaders on Capitol Hill insist they will let the top tax cuts revert back to their higher levels under President  Clinton which will push the highest marginal tax rate from 35 percent to over 40 percent in 2011 and beyond.

But Democrats who oppose the tax hikes say that with the Federal Reserve saying the economy has been showing “widespread signs of deceleration,” with economic growth declining to 2.6 percent in the second quarter, that this is no time to be raising taxes on employers who produce the most jobs and investors who provide the capital that is the economic blood supply for the entire country.

The newest sign of the Democrats’ rising political rebellion came last week when a group of four House lawmakers circulated a draft letter among its party caucus calling for keeping all of the tax rates enacted by President George W. Bush in 2001 and 2003 where they are now.

“We believe in times of economic recovery it makes good sense to maintain things as they are in the short-term, to provide families and businesses the certainty required to plan and make sound budget decisions,” the four Democrats said in the draft letter that was circulated for signatures over the weekend and was expected to be debated Monday or Tuesday.

The letter, drafted by Democratic Reps. Jim Matheson of Utah, Glenn Nye of Virginia, Melissa Bean of Illinois and Gary Peters of Michigan, calls for a temporary extension of the two top tax rates and retaining all of the other Bush tax cuts for couples making less than $250,000 a year.

These lawmakers are among some of the most vulnerable Democrats seeking re-election in November, many in GOP-leaning districts where opposition to raising taxes on anyone in a recession is strong.

Rep. Peters, who represents a district in the Detroit suburbs, usually held by Republicans, told the Detroit Free Press last week that extending the tax cuts “is the right thing to do, as anything less jeopardizes economic recovery.”

Among other House Democrats who oppose ending the two highest income tax cuts:

– Rep Gerry Connolly of Virginia who now says the tax cuts should be kept in place to give the economy more time to recover because it remains “fragile.”

– Rep. Harry Mitchell of Arizona says he is “strongly” against letting the tax cuts expire because “we need to encourage investment, not discourage it.”

– Rep. Jim Himes of Connecticut wants a temporary extension to give the economy more incentives to recover, adding that earning $250,000 a year, especially among small businesses, “does not make you really rich.”

– Rep. Ron Klein of Florida has called for at least a one year extension of the top Bush tax cuts for now, saying “our top economic priority has to be job creation.”

– Rep. Bobby Bright of Alabama is opposed to letting the tax cuts expire in three and a half months because he says the majority in his district “don’t believe in tax increases on anybody at this point in time.”

A growing number of Democratic candidates running for open Senate seats have also switched their position on the Bush tax cuts, including  Robin Carnahan in Missouri, Jack Conway in Kentucky, Brad Ellsworth in Indiana, and Charlie Melancon in Louisiana.

In the Senate, where Democrats are struggling to find the 60 votes they need to bring legislation up for consideration, four Democrats have made it clear they do not support Obama’s plan to let the two top rates expire: Joe Lieberman of Connecticut, Evan Bayh of Indiana, Kent Conrad of North Dakota, and Ben Nelson of Nebraska.

Nelson said the tax cuts should be kept in place “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.”

And it isn’t just Democrats in Congress and running for higher office who opposing raising taxes on wealthier Americans and small businesses. Some of Obama’s own economic advisors oppose his plan, too.

Last week, former  Obama adviser Peter Orszag, who directed the White Office of Management and Budget, came out against Obama’s plan in a New York Times op-ed column.

“No one wants to make an already stagnating jobs market worse over the next year or two,  which is exactly what would happen if the cuts expire as planned,” Orszag wrote.

Last week, Obama claimed that despite all of the economic data showing the economy was weakening, the economy was moving in the right direction.

But many economists disagree.

“President Obama likes to claim conditions are better now than when he took over from President Bush, but things are getting worse,” University of Maryland economist Peter Morici wrote in the Baltimore Sun Monday.

“When House Speaker Nancy Pelosi and Democrats took control of Congress in January 2007, the federal deficit was $161 billion, and unemployment was 4.6 percent,” Morici said.

Now, with the Democrats in full control of Congress and the White House, the annual budget deficit has climbed to $1.4 trillion and unemployment is climbing toward 10 percent.

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