Nov. 30 (Bloomberg) -- President Barack Obama directed Treasury Secretary Timothy Geithner and budget office director Jack Lew to lead negotiations with congressional Republicans to break a stalemate on extending Bush-era tax cuts.
After meeting for almost two hours with Republican and Democratic congressional leaders at the White House, Obama said that both sides agree action is needed to extend tax cuts to middle-income families before the end of the year even as they remain divided on tax rates for the wealthiest Americans.
“There must be some sensible common ground” to resolve differences on taxes, Obama said. He said he appointed Geithner and Lew “to break through this logjam.”
Senator Jon Kyl of Arizona will represent Senate Republicans in the talks and Representative Dave Camp of Michigan, who will be Ways and Means chairman in the next session of Congress, will represent House Republicans.
Senate Finance Committee Chairman Max Baucus of Montana will represent Senate Democrats in the negotiations, Senate Majority Leader Harry Reid said. Maryland Representative Chris Van Hollen will negotiate for House Democrats.
The White House session was Obama’s first meeting with Republican and Democratic leaders since the midterm elections that put Republicans in control of the House starting in January and narrowed the Democratic majority in the Senate.
“The American people did not vote for gridlock,” Obama said. “They’re demanding cooperation and they’re demanding progress.”
The president said he expects to hold more such meetings to help create a less partisan atmosphere in Washington and address issues beyond the tax debate.
The benchmark Standard & Poor’s 500 Index fell 0.6 percent at 4 p.m. in New York, paring a larger slide after Obama announced he was assigning Geithner and Lew to lead negotiations from the White House side. The Dow Jones Industrial Average slumped 46.47 points to 11,006.02.
House Republican leader John Boehner said at the Capitol that he expects the talks with Geithner and Lew to begin today.
Negotiators must confront six pieces of a tax puzzle to complete their work. They face choices over extending lower income tax rates across-the-board or just on the first $250,000 of income. They also must decide whether to keep the 15 percent tax rate on most dividends and long-term capital gains or let them revert to higher levels and resolve a decade-long dispute over the appropriate level of taxation on million-dollar estates.
Soon-to-expire tax incentives for parents, married couples and low-income workers also are in the mix, as is action to roll back a $66 billion alternative minimum tax increase in place for this year. Lawmakers also are struggling to restore dozens of business-related tax breaks that expired at the end of 2009, including a research credit claimed by more than 6,000 companies.
Obama and many Democrats want to retain tax cuts passed in 2001 and 2003 only on the first $200,000 annually earned by individuals and the first $250,000 earned by married couples filing jointly.
Obama has repeatedly said that the U.S. can’t afford to permanently extend the lower tax rates for those with incomes above those figures -- about 3 percent of taxpayers, or 4.5 million households.
Criticism of Priorities
Republicans want tax cuts extended permanently for all income levels, saying that raising taxes during a fragile economic recovery is a bad idea. Without action by Congress, all of the Bush-era tax cuts will expire on Dec. 31, resulting in more tax withholding from paychecks in January for millions of Americans.
After the White House meeting, lawmakers said they were discussing whether to go ahead with plans this week to hold votes on a proposal to only extend the tax cuts for the first $250,000 of income. House Speaker Nancy Pelosi earlier this month said that vote would occur this week.
“That’s not clear whether we’ll take that vote this week,” Representative John Larson, the fourth-ranking Democrat in the House, said before a meeting of House Democratic leaders. Afterward, House Majority Leader Steny Hoyer of Maryland said he hopes the House would go ahead with the vote.
In the Senate, Budget Committee Chairman Kent Conrad said he expects Senate leaders to delay a planned vote next week on the same issue. “I would give this thing a chance to work,” the North Dakota Democrat said, referring to the talks with Lew and Geithner.
Both sides began the formal talks by sticking to their long-held positions. Representative Eric Cantor of Virginia, the second-ranking Republican in the House, said he will urge his party to oppose a partial extension.
“We don’t feel that there should be anyone suffering a tax-rate increase right now while we’ve got nearly 10 percent unemployment,” he said on Bloomberg Television.
Even before going to the White House, Senate Republican leader Mitch McConnell was attacking Democrats, accusing them of “clinging to the wrong priorities” after the election.
“Instead of preventing a tax hike, they want to focus on immigration” and gays in the military, McConnell said.
The Democrats’ “entire legislative plan” for the next several weeks is focused “on anything except jobs, which is astonishing when you consider the election we just had,” he said.
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