Axelrod Says Obama Insists on Middle-Class Tax Cuts

President Barack Obama wants Congress to extend middle-income tax cuts and would reject Republican efforts to extend tax breaks for the wealthiest Americans, said David Axelrod, a White House senior adviser.

“Our position is clear: We believe that we should get a clean bill that extends the middle-class tax cuts, and that’s it,” Axelrod said in an interview on Bloomberg Television. “I don’t think the president will support anything that doesn’t do that.”

He stopped short of saying the president would veto a bill that included keeping current rates for wealthier taxpayers.

The president will outline his stance in a speech this afternoon in Ohio. His insistence on letting the top tax rates expire at the end of this year sets up an election-year confrontation with Republicans, who are seeking to take control of the House and Senate with campaigns focused on the economy and the federal budget deficit.

House Republican Leader John Boehner said today that lawmakers should work with the White House to freeze government spending at 2008 levels and extend the Bush-era tax cuts for everyone for two years.

“What that would do is help all small business, who have no clue what the coming tax rates are going to be, give them some certainty,” Boehner, of Ohio, said in an interview on ABC’s “Good Morning America.”

Photographer: Jay Mallin/Bloomberg

David Axelrod, senior adviser to U.S. President Barack Obama. Close

David Axelrod, senior adviser to U.S. President Barack Obama.

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Photographer: Jay Mallin/Bloomberg

David Axelrod, senior adviser to U.S. President Barack Obama.

Pressure on Budget

Axelrod said “budgetary pressures” argue against extending tax cuts for the wealthiest. The administration forecasts this year’s deficit will hit a record $1.47 trillion this year and $1.41 trillion next year.

Keeping the lower rates for the top tax brackets would require the government to “borrow additional money,” he said.

Obama has endorsed only an extension of tax cuts for those earning less than $200,000 per individual or $250,000 per couple.

The 3.8 million filers who fall in the $200,000 to $500,000 income range would pay $2 billion more in 2011 taxes, or an average of $532, according to a study by the nonpartisan congressional Joint Committee on Taxation.

The biggest burden would fall on the 608,000 taxpayers who make between $500,000 and $1 million and the 315,000 who earn more than $1 million; the first group would pay $6.5 billion more, or an average of almost $10,000, and the second group would owe $31 billion more, or almost $100,000 on average, the analysis said.

Lost Revenue

Obama’s plan to extend the tax cuts only for individuals making less than $200,000 annually and families earning less than $250,000 -- about 98 percent of all taxpayers -- would cost the federal treasury $2.2 trillion in forgone revenue over the next decade, according to an analysis of government data released Sept. 2 by the Pew Economic Group. Extending all the tax rates would cost about $3.3 trillion, according to Pew.

The president today will also discuss his six-year infrastructure plan that would spend $50 billion in the first year. The administration hasn’t said how much should be spent after that.

The new spending would be on top of the economic stimulus package approved last year that allocated $38.6 billion for the Transportation Department. So far, $18.5 billion has been paid out, according to a government website that tracks the spending.

Infrastructure Spending

“The program was designed to spend out over time,” Axelrod said. “We understood that we were going to need that economic impetus for some time to come. And also, to responsibly do infrastructure, you have to do it with some forethought.”

Obama also will call for expanding a tax incentive to encourage business investment and urge Congress to extend permanently and expand a research-and-development tax credit for businesses. Those two measures together would cost about $130 billion over a decade, according to White House figures.

Obama isn’t planning any other economic initiatives before the November congressional election, according to an administration official who briefed reporters on condition of anonymity to preview the president’s remarks. There are no plans to propose changes in payroll taxes to provide an incentive for hiring or put more money into workers’ pockets, the official said.

Obama intends to draw a contrast with the Republican approach outlined by Boehner in a speech he gave in Cleveland on Aug. 24, according to another administration official.

Election-Year Politics

Obama’s proposals, many of which he has introduced before, will run up against a tight congressional calendar and election- year politics. The Senate is scheduled to return to Washington Sept. 13, and the House reconvenes the next day. Lawmakers will be at work for about three weeks before leaving again to campaign for the Nov. 2 elections.

Non-partisan analyst Charlie Cook, publisher of the Cook Political Report, projects that Republicans will gain at least 40 seats and take control of the 435-member House. Cook projects a net Republican gain of seven to nine seats in the 100-member Senate, where there are currently 41 Republican senators.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Julianna Goldman in Washington at jgoldman6@bloomberg.net

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