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Permanent Middle Class Tax Cuts TOO EXPENSIVE, Dem Leader Says

STEPHEN OHLEMACHER   06/22/10 03:31 PM ET   AP

Hoyer Tax Cuts

WASHINGTON — A top House Democrat said Tuesday that tax increases will eventually be necessary to address the nation's mounting debt, raising a difficult election-year issue as Democrats fight to retain control of Congress.

In the near term, House Majority Leader Steny Hoyer raised the possibility that Congress will only temporarily extend middle-class tax cuts set to expire at the end of the year. He pointedly suggested that making them permanent would be too costly.

Tax cuts enacted under former President George W. Bush are scheduled to expire at the end of the year, affecting taxpayers at every income level. President Barack Obama proposes to permanently extend them for individuals making less than $200,000 a year and families making less than $250,000 – at a cost of about $2.5 trillion over the next decade.

"As the House and Senate debate what to do with the expiring Bush tax cuts in the coming weeks, we need to have a serious discussion about their implications for our fiscal outlook, including whether we can afford to permanently extend them before we have a real plan for long-term deficit reduction," Hoyer, a Maryland Democrat, told a forum on deficit reduction.

The tax cuts will be a big political issue in many congressional elections this fall, providing potential fodder for both political parties. Democratic leaders have yet to lay out a schedule for dealing with the tax cuts, but many rank-and-file Democrats want to extend them before the elections, so they can campaign on passing tax cuts for the middle class.

Republicans argue that many of the high earners who would face tax increases under Obama's plan are small business owners struggling to stay afloat in a tough economy.

If the Democratic-controlled Congress doesn't extend the tax cuts before the elections, Republicans are ready to pounce, highlighting the looming tax increase that awaits nearly every U.S. taxpayer in January. Democrats would be left in the awkward position of promising to extend the tax cuts in a lame duck session following the elections, after nearly two years of inaction by the current Congress.

In the short term, deficit spending has been necessary to stimulate the economy, Hoyer said.

"I don't think this is the time to increase taxes," Hoyer told reporters after the forum.

But in the longer term – after the economy has improved – Congress will have to rein in spending and raise taxes to tackle the debt, Hoyer added.

"Raising revenue is part of the deficit solution, too," Hoyer said.

Obama has appointed a bipartisan commission to come up with ideas to reduce the budget deficit and has said that all options must be on the table, including spending cuts and tax increases. The commission is scheduled to release its recommendations Dec. 1.

Republicans, however, have refused to embrace any talk of tax increases.

"It's now official," Senate Republican Leader Mitch McConnell said Tuesday. "Top Democrats on Capitol Hill are starting to signal their intention to raise taxes on the middle class."

House Republican Leader John Boehner said, "The majority leader is dead wrong about the future of this country, and what we need to do, right now, to make sure the American dream is alive and well for our kids and grandkids."

On the spending side, Hoyer said Congress should consider raising the retirement age for full Social Security and Medicare benefits, and making those benefits progressive so that wealthier recipients get less than the needy.

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Filed by Nate C. Hindman  |