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Obama Campaign Move on Taxes Not Going to Happen Obama Campaign Move on Taxes Not Going to Happen

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White House / ANALYSIS

Obama Campaign Move on Taxes Not Going to Happen

President Obama calls on Congress to pass a temporary, one-year extension of the Bush-era tax cuts for people who make less than $250,000 a year.(AP Photo/Susan Walsh)

President Obama delivered essentially a campaign speech on Monday to make the case for extending the Bush-era tax cuts for one year for families who earn under $250,000.

“Our biggest challenge right now is to reclaim the security that so many middle-class Americans have lost over the last decade,” the president said at the White House, flanked by a group of middle-class taxpayers so diverse that they looked like an old Benetton ad.

(FULL TEXT: Obama's Speech On Extending Tax Cuts)

 

While this rhetoric may play well in swing states where taxing the rich gives the Dems a boost in polling, this type of talk also serves as reminder about the deep divisions within the Democratic Party. See, the problem is that they can’t really agree who is rich.

Both Sen. Chuck Schumer, D-N.Y., and House Minority Leader Nancy Pelosi, D-Calif., have argued that taxing the wealthy means imposing higher taxes on those who earn more than $1 million a year, instead of the $250,000 threshold the president hammered home on Monday. The thinking goes: $250,000 does not go as far for families in expensive states, like Schumer’s New York or Pelosi’s California, as it does in, say, North Dakota.

And, even Obama has muddied his tax-the-rich message with his so-called Buffett Rule, which also sets the threshold for the rich at $1 million a year. Named after investor Warren Buffett, that proposal seeks to impose a minimum tax on people earning $1 million a year by limiting the number of deductions they can take — like a Richie Rich version of the alternative minimum tax.

All of this stands in direct contrast to the more liberal sectors of the party, including the labor unions, which have steadfastly held onto the $250,000 threshold, or to more liberal members of the Democratic Party, such the staunch Obama supporter Sen. Dick Durbin of Illinois, who has historically supported the $250,000 mark.

It’s enough of an issue to put the Democrats on the defensive. "At least we know we want to protect the middle class," Rep. Marcy Kaptur, D-Ohio, argued on CNN on Monday. “I think where you put that line, whether it’s [$1] million and above, $250,000 and above, that’s to be worked out.”

Later on Monday, Schumer walked backwards a bit on his idea of the $1 million threshold. According to a Senate Democratic aide, Schumer told White House officials that he would not push any legislation right now at the $1 million mark, even though politically he still prefers this idea. “At this make-or-break moment for the middle class, we stand in total solidarity with the president on the need to restore fairness to our tax system. Republicans and Democrats alike agree on the need to extend the tax cuts for the 98 percent of Americans who make below $250k, so let's heed the president's call and focus on that right away,” Schumer said in a statement.

Administration officials also tried to preemptively strike down any notions of Democratic fuzziness according to The New York Times, which reported: “They said whether to use $250,000 or $1 million as a cutoff was more a matter of strategy than a ‘religious debate,’ in the words of one official.”

But, there remains a huge difference both fiscally and politically between the $250,000 and $1 million markers. According to the Center on Budget and Policy Priorities, a left-leaning think tank, the higher threshold would raise whopping $366 billion less in revenue over the next 10 years: money that would need to be made up elsewhere. Politically, saying the Democrats want to keep the lower tax rates for people who earn less than $250,000 a year plays on the campaign trail, where Obama on Monday also planned to expand on the issue in interviews with local TV stations. If the president moved away from the $250,000 threshold he has supported since being elected, it would be a huge shift.

But the $1 million marker is certainly something worth watching after the election, as Congress and Obama muddle through the lame-duck negotiations worth trillions of dollars in tax policy. For now, both Republicans and Democrats agree that tax cuts for families who make under $250,000 should be extended for one year. It’s like everyone agreeing they like puppies or ice cream on a hot day.

We won’t see any sincere, real movement or compromise on the issue until late November or December. Only then will the real discussion will take place — and will the $250,000 or $1 million threshold show its true stripes as a piece of leverage in what insiders predict will be a protracted debate on the way we tax and spend.

Obama Speaks on Extending Middle Class Tax Cuts--VIDEO

 

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