July 9 (Bloomberg) -- President Barack Obama urged Congress to pass a one-year extension of Bush-era tax cuts for families making less than $250,000 a year while letting rates rise for higher earners, sharpening differences with congressional Republicans and their presidential candidate, Mitt Romney.
The country is being held back by the partisan deadlock in Washington, and “nowhere is that stalemate more pronounced than on the issue of taxes,” Obama said in remarks today at the White House. “It’s time to let the tax cuts for the wealthiest Americans -- folks like myself -- to expire.”
Republican congressional leaders rejected Obama’s call, saying the economy is too weak to raise taxes for anyone. They vowed to press ahead with legislation to extend all the tax cuts, a measure Obama said he would veto.
Obama is focusing on the issue of tax fairness three days after a government jobs report showed the nation’s unemployment rate stuck at 8.2 percent. He argued that tax cuts for the wealthy haven’t helped the economy and are contributing to the deficit.
The president sought to counter a Republican plan for a vote on a one-year extension of all the tax cuts with his call for acting immediately to keep the existing rates for those making less than $250,000 a year and letting the Nov. 6 presidential election settle the issue of the tax cuts for the wealthiest. Obama also said the post-election period may be used to negotiate an overhaul of the tax code.
Romney campaign spokeswoman Andrea Saul said in a statement before the president’s remarks that Obama’s approach would amount to “a massive tax increase” for “families, job creators, and small businesses.”
“It just proves again that the president doesn’t have a clue how to get America working again and help the middle class,” Saul said. She said Romney wants to lower marginal tax rates and “understands that the last thing we need to do in this economy is raise taxes on anyone.”
The president’s remarks kick off a week during which he will visit the swing states of Iowa and Virginia and his campaign will hold events in New Hampshire, Nevada, Colorado and Florida intended to show Obama as focused on middle-class taxpayers and Romney as attuned to the richest Americans.
Following today’s announcement, Obama spent part of the afternoon doing interviews with local television stations from eight television markets in some of the states his campaign is counting on in November, including Florida, Wisconsin and Nevada.
The Republican-controlled House plans to vote later this month on extending the expiring tax cuts for all income levels for a year and set in motion a process that would lead to a more comprehensive overhaul of the tax code in 2013. That bill isn’t expected to advance in the Senate, where Democrats have a majority.
In an interview with New Orleans television station WWL, Obama said that, if Congress sent him legislation extending all the Bush-era tax cuts, “I would veto it.”
The Senate will vote on Obama’s plan “in the weeks ahead,” Majority Leader Harry Reid, a Nevada Democrat, said in a statement.
Republicans and Democrats are dug into their familiar positions before the election, and neither will budge soon, said Jon Traub, managing principal of tax policy at Deloitte Tax LLP in Washington.
“I don’t see any probability between now and Election Day Republicans veer from their long-held position that all of the tax cuts should be extended,” said Traub, who was staff director for the House Ways and Means Committee until earlier this year.
If Congress doesn’t act, all the tax cuts passed during former President George W. Bush’s first term and extended by Obama and Congress in 2010 would expire at the end of the year. The top tax rate for ordinary income will increase to 39.6 percent from 35 percent. The top tax rate on capital gains will increase to 23.8 percent from 15 percent, and dividends would be taxed as ordinary income.
A one-year extension of the expiring tax cuts for all income groups would reduce projected federal revenue by $426 billion, and the tax cuts above the $250,000 threshold make up $68 billion of that total, according to an analysis by the nonpartisan Joint Committee on Taxation that was provided to Senate Finance Committee Republicans.
“Let’s not hold the vast majority of Americans and our economy hostage while we debate the merits of another tax cut for the wealthy,” Obama said. The fate of those cuts “will be decided by the outcome of the next election. My opponent will fight to keep them in place. I will fight to end them.”
By drawing the line for tax increases at $250,000 adjusted gross income for married couples and $200,000 for individuals, Obama sets up potential contrasts with two factions of senators in his party.
Some Senate Democrats, including Ben Nelson of Nebraska, have expressed openness to negotiating with Republicans on extensions of tax rates for all income levels.
Others, including Charles Schumer of New York, have floated the idea the line at which tax increases start should be set at $1 million. That approach would bring in much less revenue and be more politically defensible, particularly in high-income states such as New York and New Jersey where a greater percentage of taxpayers would be affected by Obama’s threshold.
With job growth remaining stuck in June, Obama is looking for ways to convince voters that their economic situation will improve. U.S. employers added 80,000 jobs last month, lower than economists’ forecasts and up only slightly from a 77,000 increase in May.
House Speaker John Boehner, an Ohio Republican, said Obama is “doubling down on his quixotic call for the same small business tax hikes that have been routinely rejected by the House and Senate” to distract from last week’s jobs figures.
Obama’s tax push involves both his official and campaign advisers. Robert Gibbs, former White House press secretary and now a campaign adviser, appeared on morning news shows today to promote Obama’s message on taxes while highlighting the campaign’s portrayal of Romney.
Romney thinks “we should shower rich people with tax breaks” Gibbs said on NBC’s “Today” show. “Those are the two different contrasting visions in this campaign.”
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