Obama Calls For Tax Cut Extension For Middle Class

President Obama has called on Congress to extend tax cuts for the middle class, while allowing rates for the wealthiest Americans to go up.

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President Obama is posing an election year challenge to Republicans over taxes. The president wants Congress to extend the Bush-era tax cuts for most Americans while allowing taxes for the wealthiest to go back up. That's a proposal he campaigned on four years ago and he'll be making the case again on the trail this week. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: For several weeks now, President Obama has been arguing that part of what's holding America back economically is a political stalemate in Washington.

PRESIDENT BARACK OBAMA: And nowhere is that stalemate more pronounced than on the issue of taxes.

HORSLEY: Today, the president tried to move that issue front and center by addressing the Bush-era tax cuts, which are set to expire at the end of this year. Mr. Obama wants to let the tax cuts lapse on schedule for the wealthiest Americans, those making more than a quarter million dollars. But he told a gathering of middle-class families in the White House East Room, their taxes should stay where they are.

OBAMA: Let's not hold the vast majority of Americans and our entire economy hostage while we debate the merits of another tax cut for the wealthy.

HORSLEY: In effect, the president is trying to decouple middle class tax rates from taxes on the wealthiest 2 percent. His Republican rival, Mitt Romney, on the other hand, has called for making all of the Bush-era tax cuts permanent as well as additional cuts that would primarily benefit the rich.

OBAMA: In many ways, the fate of the tax cut for the wealthiest Americans 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. But that argument shouldn't threaten you.

HORSLEY: If this all sounds familiar it's because we went through this very same debate two years ago. In 2010, Republicans in Congress insisted on preserving the tax cuts for all income levels, and Mr. Obama eventually backed down. Senate Republican leader Mitch McConnell suggested on CNN he'll be making the same arguments again.

SENATOR MITCH MCCONNELL: I negotiated with Vice President Biden the two-year extension of the current tax rates that are - that we're in right now. The president signed it because he argued that to let taxes go up would make the economy worse. We have a slower growth rate today than we had then.

HORSLEY: A spokeswoman for Mitt Romney added the president's proposal would raise taxes on job creators, although the White House counters 97 percent of all small businesses would be untouched by the higher rates. Mr. Obama argues the slow growth and middle class stagnation of the last decade disproves the trickle-down theory used to justify tax cuts for the rich. He insists most people did better in the 1990s, when the wealthy were paying taxes at a higher rate.

OBAMA: I just believe that anybody making over $250,000 a year should go back to the income tax rates we were paying under Bill Clinton, back when our economy created nearly 23 million new jobs, the biggest budget surplus in history and plenty of millionaires to boot.

HORSLEY: A Gallup poll this spring found more than six in 10 Americans support higher taxes on the wealthy, and Mr. Obama hopes to tap into that sentiment when he campaigns this week in the battleground states of Iowa and Virginia. The president's tax plan is likely to be more useful as a political prop than an actual budget blueprint, at least until after November. Roberton Williams of the Tax Policy Center says that's when Congress will have to act, or else every taxpayer will face a bigger bill from the IRS.

ROBERTON WILLIAMS: No one wants to see all the tax cuts expire because everyone realizes the negative impact that would have on the economy. That said, people are not going to come together and say, I'm willing to give on this and give on that. It's a lot easier to kick the can down the road for another year and say, let's try again after the dust has settled in the 2012 election.

HORSLEY: The president's plan would offer a temporary escape route from the so-called fiscal cliff, but the same taxing questions would resurface next year. Scott Horsley, NPR News, the White House.

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