Democrats Snared By Republican Tax Trap

Obama with economic team

hide captionPresident Barack Obama urges Congress to pass a bill for middle class tax cuts along with members of his cabinet and economics team, Sept. 15, 2010. 

Chip Somodevilla/Getty Images

When the Bush tax cuts were passed in 2001 and 2003, the thinking among cynical observers at the time was that the tax cuts were cleverly made to sunset at the end of 2010 not only to ease the worries of deficit hawks but to jam up Democrats politically.

Bush Administration officials and congressional Republicans knew back when the tax cuts were enacted that the day would come when the cuts would either be extended or left to die.

And anyone who voted to allow them to lapse (read Democrat) could be accused of raising taxes, never a popular position with most voters. In other words, Republicans set a tax trap for Democrats and seems to have worked.

In the run-up to the mid-term election, on Thursday, Democrats decided to put off a vote on extending the tax cuts until after the election.

Democratic lawmakers in close races worried that a vote to extend the cuts only for households with incomes below the $250,000 threshold, the preferred approach of President Obama and congressional leaders, would expose them to the toxic charge of voting for higher taxes.

So they prevailed. Thus the vote will now come after the election.

An excerpt from The Hill gives a sense of the fear on Capitol Hill surrounding a vote extending the tax cuts.

Liberal lawmakers in both chambers had pressed their leaders to schedule a vote on legislation that would make permanent the tax cuts for families earning below $250,000 but allow the rates for families above that threshold to rise. Families in the top brackets would see their income tax rates rise from 33 and 35 percent to 36 and 39.6 percent, respectively.

Centrists and Democrats facing tough reelections, however, balked at voting for any tax increases. Republicans have argued for an extension of all of the current tax rates, which became law during the Bush administration.

Sen. Evan Bayh, a centrist Democrat from Indiana, said the divisions in his party emerged in stark contrast during the lunchtime meeting.

“A majority of opinion was probably for having a vote, but for a majority of people who were running, maybe not,” he said.

But the tax trap doesn't go away for Democrats. They'll still be snared.

If Democrats lose the House but retain the Senate, as many analysts now think likely, soon after taking power in January a Republican-led House could send to the Senate legislation to extend tax cuts for households with over $250,000 in income.

If Senate Democrats have an even smaller majority than the 57 members they have now, which analysts also expect, the pressure will likely increase on Senate Democrats to vote for those higher-income tax cuts.

Voting against them would allow Republicans to accuse Democrats of voting for huge tax increases since wealthier households pay the lion's share of taxes. In 2007, for instance, taxpayers in the top one percent of income paid 40.4 percent of all taxes.

If the Senate Democrats buckle and vote to extend tax cuts to the wealthy and Obama sticks to his guns on the issue with a veto, that would allow Republicans to intensify their charges that he's a typical tax-and-spend as he heads towards his re-election.

A possible lifeline for Democrats is that they do have some polling on their side suggesting that voters support the Obama position that tax cuts only be extended for households under $250,000.

If voters beyond those in the Tea Party movement start showing a strong preference that federal deficit and the debt be placed on a significant downward track, then Obama may be better able to successfully fend off Republican attacks about being a taxer and spender.

But Democrats clearly have the trickier political landscape to navigate on the tax issue than Republicans.

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