Senator Olympia J. Snowe, Republican of Maine, says Congress should pass the middle-class tax cut extensions now.
WASHINGTON — With President Obama insisting on higher tax rates for affluent Americans and winning public support for the idea, Congressional Republicans find themselves in an increasingly difficult political spot and are quietly beginning the difficult search for a way out.
[h=3]Fiscal Crisis Could Affect Timing of Dividends[/h]Wal-Mart, Cisco Systems and H.J. Heinz are among the lengthening list of companies paying early dividends, before the end of the year, to spare their shareholders from the higher tax rates that may take effect next year.
- [h=6]Republicans Make Counteroffer in Fiscal Talks (December 4, 2012)[/h]
Senior Republican leadership aides say they are contemplating a fallback position since a standoff over expiring tax rates will be portrayed by Democrats as evidence that the opposition is willing to allow taxes to rise on the middle class to keep taxes from rising on the rich — and their intransigence could mean taxes go up on rich, poor and middle class alike.
The leadership officials now say that if no deal can be struck to avert the en masse expiration of all the Bush-era tax cuts and the onset of deep, across-the-board spending cuts, they could foresee taking up and passing legislation this month to extend the expiring middle-class tax cuts, then resume the bitter fight over spending and taxes as the nation approaches the next hard deadline: its statutory borrowing limit, which could be reached in late January or February.
“There’s always better ground, but you have to get there,” said Representative Michael C. Burgess, Republican of Texas, who made it clear he does not support allowing any taxes to rise.
Senator Olympia J. Snowe of Maine, who is retiring, joined a handful of other Republicans on Tuesday suggesting that Congress should pass the middle-class tax cut extensions now, then leave the fight over taxes and spending until later. Americans, she said, “should not even be questioning that we will ultimately raise taxes on low- to middle-income people.” Congress could take that off the table “while you’re grappling with tax cuts for the wealthy,” she said.
But any move toward compromise with Democrats on fiscal issues quickly comes under attack from conservatives as a surrender and unsettles the rank-and-file. It is a dynamic that has haunted Speaker John A. Boehner throughout the 112th Congress, as he has repeatedly been caught between the imperative to govern and the need to satisfy the restive right. He has drawn fire this week for removing a handful of House Republicans who have defied leadership from their preferred committee seats, a step he took to enforce party discipline.
Mr. Obama made clear on Tuesday in an interview with Bloomberg News that he was not going to budge on raising tax rates on income over $250,000. “We’re going to have to see the rates on the top 2 percent go up,” Mr. Obama said in his first interview since his re-election, “and we’re not going to be able to get a deal without it.”
The prospect of allowing an extension only of the middle-class tax cuts is just one possibility, and Congress may never reach that point if an agreement can be reached or if another alternative can be found. And it would be a bitter pill for Republicans to swallow since they have repeatedly called for an extension of all the expiring tax cuts, saying any increases could harm the economy.
But Republicans also know they have a problem: many liberal Democrats are more than willing to return to the Clinton-era tax code, and to allow across-the-board cuts to take effect, which disproportionately affect the military, rather than compromise too much with Republicans after the strong Democratic showing in the elections.
“It’s a terrible position because by default, Democrats get what they want,” said Representative James Lankford, Republican of Oklahoma, who admitted his party is boxed in.
But in the debt ceiling fight, the tables might turn. Many conservative Republicans say they are willing to let the nation default if Congress refuses to cut spending. If the tax rate fight is already resolved by the time the debt limit increase is needed, Democrats will find themselves without the leverage they now have with the expiration of the lower tax rates a certainty unless Congress acts affirmatively.
