House heading toward election-year tax showdown

WASHINGTON (AP) — An election-year tax faceoff between
Democrats and Republicans in the GOP-controlled House is heading toward a
predictable outcome Wednesday.
Republicans are poised to pass a
bill to renew a full slate of Bush-era tax cuts for every working
American. Democrats are countering with a doomed plan that would extend
the tax cuts for all but the highest-earning Americans.
The
dueling votes are more about political messaging three months before
Election Day than a genuine attempt to resolve longstanding differences
over taxes on higher-bracket earners.
The impasse threatens a fiscal stalemate that could result in higher payroll
deductions for every worker.
The
Bush-era tax cuts — renewed in their entirety two years ago — expire
again Dec. 31. Many economists believe allowing tax rates to snap back
to Clinton-era levels could drive the economy back into a recession,
especially if automatic spending cuts designed as punishment for
Washington’s failure to enact another deficit-cutting bargain strike at
the same time.
But the common wisdom in Washington is that the
outcome will be determined by whether President Barack Obama wins
another term or Republican Mitt Romney boots Obama out of the White
House.
The White House promised Tuesday that Obama would veto the
GOP plan if it were sent to his desk. Obama instead supports a plan that
passed the Democratic-controlled Senate last week by a near party-line
51-48 vote.
Republicans say Obama’s insistence on raising taxes on
wealthier earners will sting small-business owners who create jobs.
Democrats counter that the taxes only apply to the earnings of
individuals exceeding $200,000 yearly and couples surpassing $250,000 —
exempting 98 percent of taxpayers and all but the top 3.5 percent of
taxpayers with business income.
"Why can’t you just do what you
agree on and then continue the conversation on the rest?" House Minority
Leader Nancy Pelosi, D-Calif., said.
Obama has made tax fairness — which includes tax increases on the rich — a big theme
of his re-election campaign.
Likewise,
Republicans have made resolute opposition to tax increases — especially
as the economy is weak — a major element of their election-year
platform.
The White House said that if the tax cuts were not
continued, middle-class families would face average tax increases next
year of $1,600. It also said the GOP bill would grant tax reductions
averaging $160,000 to households where income exceeds $1 million
annually.
The Democratic version also would boost the top tax rate
paid by people who inherit estates to 55 percent, exempting the first
$1 million in an estate’s value. The GOP measure would maintain today’s
35 percent top rate and would not tax the first $5.12 million of an
estate’s value.
The GOP bill ignores some tax credits for low- and
middle-income families that Democrats want to extend for college costs;
for some low-income couples and large working families; and for
families with children.
All were part of Obama’s 2009 economic
stimulus bill. Democrats say those tax breaks were meant to be
permanent, but Republicans say they were only a short-term response to
the recession.
Copyright 2012 The Associated Press.