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Congress / Taxation

Short-Term Extension of Tax Cuts on the Table

Both Obama and McConnell express willingness to consider temporary extension of all Bush-era tax cuts.

(Chip Somodevilla/Getty Images)

November 7, 2010

Updated at 8:58 a.m. on November 8.

President Obama said Sunday in his first interview since Tuesday’s elections that there's a “basis for a conversation” with Republicans over the fate of expiring Bush-era tax cuts. According to excerpts of Obama’s interview on CBS’s 60 Minutes, he declined to endorse specific proposals like a two-year extension of all the 2001 and 2003 tax cuts, floated by presumptive House Speaker John Boehner, R-Ohio, in September. Nor did Obama rule it out, however.

“I think that what that means is that... we can look at what the budget projections are. We can think about what the economy needs right now, given that it's still weak,” Obama said in the interview, which will air in full tonight. “And hopefully, we can agree on a set of facts that leads to a compromise. But my number one priority coming into this is making sure that middle class families don't see their tax rates go up January 1.”

 

If there is no agreement, tax rates for all Americans go back to where they were a decade ago. That means the 10 percent bracket would be eliminated, the $1,000 per child tax credit would be slashed in half, and stock dividends would be taxed as ordinary income, for instance.

Meanwhile, Senate Minority Leader Mitch McConnell, R-Ky., who heads to the White House with other congressional leaders on November 18 to meet with the president, said he would consider a temporary extension of all the Bush tax cuts. "I do sense some flexibility on the president's part, and we're happy to talk to him about it,” McConnell said on CBS’s Face the Nation.

However, the likely House Majority Leader, Rep. Eric Cantor, R-Va., refused to commit to a temporary extension of all of the Bush-era tax rates, arguing that small businesses need the certainty that a permanent extension would provide.

“I am not for sending any signal to small businesses in this country that they’re going to have their tax rates go up,” Cantor said on Fox News Sunday, when asked by host Chris Wallace if a two- or three-year extension would be acceptable. Cantor did not rule out an eventual compromise, however, and he will meet with President Obama and other congressional leaders on November 18.

President Obama has called for extending the tax cuts enacted in 2001 and 2003, but only for individuals earning less than $200,000 and households with less than $250,000 in annual income. White House press secretary Robert Gibbs this week said the president might be open to a temporary extension of all the rates, but Obama said in his weekly radio address that the goal is still permanent extension for the middle class only.

Cantor rejected that so-called “decoupling” approach. “I really want to see that we can come together and agree on the notion that Washington doesn’t need more revenues right now,” he said.

Incoming Sen. Pat Toomey, R-Pa., speaking on CNN's State of the Union, expressed confidence that congressional Republicans and the president could find mutually acceptable tax proposals. Toomey said, "I'm encouraged by some of the things President Obama has said recently," citing the president's willingness to discuss a possible cut in capital gains taxes.

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