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Middle class tax-cut issue backfiring on Democrats

By Matt Viser
Globe Staff / September 30, 2010

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WASHINGTON — President Obama’s urgent call for Congress to immediately extend tax breaks for the middle class was supposed to create a defining Democratic issue and cast Republicans as defenders of the rich on the eve of crucial midterm elections. Now, three weeks later, Democrats are further divided and Republicans are using the tax cut issue to their advantage.

The House and Senate adjourned last night, leaving the central pocketbook issue to be decided after the Nov. 2 midterm elections — and just weeks before the tax cuts are set to expire. That indecision injects more uncertainty into whose taxes will go up, and by how much.

Democrats worry that they have been robbed of their most valuable populist talking point: that cuts on income taxes should be extended for the middle class, but not for the wealthy.

“It is both a political and a governmental mistake,’’ said Representative Michael Capuano, a Somerville Democrat, of the delayed vote. He pushed for a vote this week and tried floating an alternate proposal — to no avail. “To me, it is a classic example of what’s wrong with Washington.’’

The tax cut extension is expected to remain a political issue over the next few weeks, but not in the way Democrats had initially intended. Rather than using it on the campaign trail against Republicans, Democrats could find themselves on the defensive as the GOP yesterday began framing the vote delay as an example of government ineptitude and cowardice.

“The failure to have a vote on the expiration of the tax cuts, knowing that they were coming, with a majority in the House and Senate, makes the president and the Democratic leadership of Congress look even more incompetent,’’ Republican strategist Karl Rove, a former senior adviser to President George W. Bush, said in an interview.

A national GOP group has sent out press releases targeting Democrats in key races, including Representative Niki Tsongas of Lowell, contending they put their own interests over those of taxpayers by avoiding a vote that could be perceived as a tax increase on the wealthy.

Now, the tax question awaits action in a lame-duck session in November and December, when it will be among the top issues of a crowded agenda. Some think that with the election-year posturing removed, a resolution to the issue should be easier to reach; others think the two sides could become even more entrenched.

All sides generally agree that the tax cuts should be extended for the middle class, which applies to individuals making less than $200,000 and families reporting less than $250,000.

What is less clear, and what could be determined by the outcome of the midterm elections, is whether the tax cuts should also be extended for those making more than $250,000 a year.

Republicans, along with some moderate Democrats facing close elections in conservative districts and states, argue that all the cuts should be extended to bolster a shaky economic recovery. Obama, and most Democrats, argue that the continued tax cut for the rich is not worth the cost of almost $700 billion over 10 years.

There have been several alternative proposals, including one by Capuano to double the threshold for the wealthy to $500,000. Also, some legislators and economists have backed plans to extend the tax cuts for the wealthy only temporarily — for a year or two.

Democrats would still hold the majority during a lame-duck session, but their position against tax cuts for the wealthy could become untenable if voters resoundingly repudiate their agenda. The debate could be further complicated if Democrats lose their Senate seats in states where the winner may be seated immediately. A Republican win in Illinois, Colorado, Delaware, or West Virginia would make it easier for them to stifle the Democrats’ plan through a filibuster.

“We should have gotten into it earlier,’’ said Representative Barney Frank, a Newton Democrat. “We made a mistake by not doing so.’’

Top Democrats for weeks sought a vote on extending only the tax cuts for the middle class and letting the cut for the wealthy expire.

The Senate was expected to weigh in first. During a Senate caucus meeting last week, Senator John F. Kerry of Massachusetts was among those urging his colleagues to push forward with a vote before the elections, but others in tough reelection campaigns demurred and Senate majority leader Harry Reid postponed the vote.

House Speaker Nancy Pelosi then suggested her chamber would consider proceeding on its own.

Conservative Democrats, however, worried that they would lose the messaging war to their Republican opponents and would be deemed tax-hikers. Thirty-one moderate Democrats sent her a letter earlier this month, opposing Obama’s approach and urging her to extend the tax cuts for all. “There is some polarization between the left and the right in our caucus,’’ said Representative Richard Neal, a Springfield Democrat and top member on the House Ways and Means Committee. “I think it would have helped our position [to vote before the elections], but I understand the reticence of those who are in tough elections on the Democratic side.’’

On Friday, 46 Democrats sent a letter to Pelosi urging her to call for a vote on extending the middle class tax cuts. The letter was signed by Capuano and three other members of the Massachusetts delegation — Frank; James McGovern, Democrat of Worcester; and John Olver, Democrat of Amherst. The other six members of the delegation also support Obama’s proposal, and were in favor of having a vote before the elections.

“We’re going to have to have a showdown at some point,’’ McGovern said. “It looks like we’re going to do it in a lame duck session.

Meanwhile, Republicans have seized upon the Democratic disagreements.

“By avoiding an up-or-down vote to stop the Obama tax hike until after the election, Niki Tsongas has selfishly pushed economic recovery to the side for her own political interests,’’ Ken Spain, communications director for the National Republican Congressional Committee, said, referring to the group’s press release targeting her and other potentially vulnerable Democrats.

Nick Clemons, Tsongas’s campaign manager, said that Tsongas wanted to extend the tax cuts for only the middle class. “She has said repeatedly that we need to vote on this,’’ he said.

Much of the turmoil this election season has been among Republicans and the ascendant Tea Party movement. But at least on Capitol Hill, the party has been united in blocking Democratic objectives. In the Senate, at least three moderates — Ben Nelson of Nebraska; Kent Conrad of North Dakota; and Joseph Lieberman of Connecticut — joined them in saying tax cuts must be extended for everyone.

When asked why his party could not agree on a plan, Senator Chris Dodd, Democrat of Connecticut, said simply, “Because we’re Democrats.’’

Donovan Slack of the Globe staff contributed to this report. Matt Viser can be reached at maviser@globe.com.