Obama wants to extend tax cuts 1 year

Article by: MARK LANDLER , New York Times
Updated: July 9, 2012 - 12:05 AM

His proposal applies to people making less than $250,000.

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President Barack Obama waves as he walks on the South Lawn of the White House upon his return to Washington, D.C., from Camp David, Sunday.

Photo: Yuri Gripas, UPI/MCT

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WASHINGTON - With a torpid job market and fragile economy threatening his re-election chances, President Obama is changing the subject to tax fairness, calling for a one-year extension of the Bush-era tax cuts for people making less than $250,000.

Obama planned to make his announcement in a Rose Garden ceremony Monday, senior administration officials said, as Congress returns from its Independence Day recess and both parties and their presidential candidates head into the rest of the summer trying to seize the upper hand in a campaign that has been closely matched and stubbornly static.

House Republicans plan to vote this month to extend all of the Bush administration cuts, for middle- and upper-income people, permanently beyond 2012.

The president's proposal could also put him at odds with Democratic leaders such as former Speaker Nancy Pelosi of California and Sen. Charles Schumer of New York, who have advocated extending the cuts for everyone making up to $1 million. And it will most likely do little to break the deadlock in Washington over how to deal with fiscal deficits, an impasse that has only hardened as Republicans sense a chance to make gains in Congress this fall.

But by calling for an extension for just a year, Obama hopes to make Republicans look obstructionist and unreasonable. Trying to bounce back from another weak jobs report on Friday, he also hopes to deepen the contrast with his challenger, Mitt Romney. On Friday, the president said Romney would "give $5 trillion of new tax cuts on top of the Bush tax cuts, most of them going to the wealthiest Americans."

From their stronghold in the House, Republicans plan to vote this week to repeal Obama's health care law, hoping to energize their base even though they know that the campaign to abolish the law, which the Supreme Court recently upheld, stands no chance in the Senate. Republicans also renewed their call for an overhaul of the tax code.

"You know, what we ought to be doing is extend the current tax rates for another year with a hard requirement to get through comprehensive tax reform one more time," Senate Minority Leader Mitch McConnell, R-Ky., said Sunday on the CNN program "State of the Union."

The struggle to frame the tax debate comes as the campaign moves into a period, only four months before the election, when the perceptions of voters begin to harden. Polls show a persistently tight race, with Romney closing in on Obama in certain swing states, but neither candidate able to break out decisively.

Control of Congress is also up for grabs, and McConnell said on Sunday that he believed the Republicans had a 50-50 chance to regain control of the Senate.

To find a compromise with Republicans on which Bush tax cuts to extend, Pelosi, the House minority leader, and Schumer, a member of the Senate Finance Committee, favor making $1 million in income the cutoff. Above that level, Schumer has said, people are not likely to spend the savings from lower taxes and help the economy.

Administration officials said they did not believe the difference between the White House and these Democratic leaders was a big obstacle. They said that whether to use $250,000 or $1 million was more a matter of strategy than a "religious debate," in the words of one official, who added that many other Democrats favored the $250,000 threshold.

The White House hopes to squeeze maximum political mileage out of the Rose Garden event, surrounding Obama with families and workers who would benefit from the extension. On Tuesday, he will take his message to Iowa, the battleground state that turned him into a serious presidential contender in 2008.

In Cedar Rapids, Obama plans to visit the home of Jason and Ali McLaughlin, a high-school principal and an account manager at a document-scanning company, a campaign official said. The McLaughlin family, with a combined income of $82,000, would face an extra $2,000 burden next year if the tax cuts on the middle class expired as scheduled, the campaign said.

White House officials insisted that Monday's move was more than politics. They said it would ease anxiety over the "fiscal cliff" -- the combination of tax increases and automatic spending cuts that are scheduled to kick in at the end of this year. That one-two punch, economists say, could deal a heavy blow to an already tender economy unless the White House and Congress work out some kind of compromise.

Proposing a one-year extension, a senior official said, recognizes that Obama and the Republicans are not likely to resolve the larger debate over whether to permanently extend the Bush tax cuts for everyone or, as Obama has long advocated, just for the middle-class. That debate is likely to be decided at the ballot box, where a victory by Romney would almost certainly enshrine all the tax cuts.

A one-year extension for people under $250,000 would cost the government $150 billion in revenue, the administration estimates, an amount that would be added to the deficit. In a point of comparison, economists estimate that letting the cuts expire for people above that threshold would generate $850 billion over 10 years.

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