With leaders from both parties pushing for a tough debate over the expiring Bush tax cuts as a frame for the November election, the issue is splintering Colorado Democrats in Congress.
Reps. Betsy Markey of Fort Collins and John Salazar of Manassa — the delegation’s two Blue Dog Democrats — have ended up on opposite sides of the issue.
“I just don’t think you can raise taxes on anybody in this economy,” Salazar said this week, parting ways with Markey, who flatly opposes extending the tax cuts for households making more than $250,000 a year. A plan outlined by the White House supports the extension only for the middle class.
That’s not quite as far as Colorado Democratic Sen. Michael Bennet is willing to go.
In addition to supporting the extension of cuts for the middle class, Bennet is open to an extension of the tax cuts for the wealthy — if temporary — while fellow Colorado Democratic Sen. Mark Udall would rather consider a compromise on other elements. Those might include a limit on the increase in rates the rich pay on capital gains and dividends, which the White House plan also would raise.
Those divisions suggest the debate is more muddied than party strategists on either side would like, especially for an issue that has become a proxy for a governing philosophy the two sides will take to voters in November.
When they were passed in 2001, the Bush-era tax cuts included a sunset provision because of the dramatic impact they were projected to have on the federal deficit. The cuts — which dropped the top tax rate from 39.6 percent to 35 percent as well as lowering the taxes paid by just about every American — expire at the end of this year.
But driven by the campaign-season needs of both parties, the issue has suddenly risen to the status of fiercely fought political terrain.
Conservatives see it as highlighting core Reagan-era, anti-tax values, while Democrats see the issue as underscoring their fight for the middle class.
Still, Republicans are facing their own divisions.
Tuesday, Senate Minority Leader Mitch McConnell, a Kentucky Republican, introduced a broad package of tax cuts, including extending the Bush tax cuts for all Americans — while threatening a filibuster to block any attempt to do anything less.
Two days earlier, Ohio Rep. John Boehner, the top Republican in the House, said he wouldn’t necessarily hold back the extension of middle- class tax cuts alone. He later issued a statement appearing to withdraw that concession, but some Colorado Republicans are following anyway.
Congressman Mike Coffman of Aurora thinks “something is better than nothing,” said Coffman spokesman Nat Sillin, emphasizing that his boss nonetheless believes raising any taxes right now is “bad economic policy.”
A SHRM/National Journal poll Sept. 9-12 found that 29 percent of respondents supported leaving all the tax cuts in place. Even among Republicans, supporters of extending tax cuts for the wealthy were still in the minority, at 47 percent.
The plan introduced this week by Senate Republicans may undercut a main message of many of the party’s candidates — that they are more hawkish on the deficit than Democrats.
Going beyond the permanent extension of the Bush tax cuts, McConnell’s bill also limits the alternative minimum tax and confines the estate tax to large holdings. The plan would more than double projected federal deficits over the next 10 years.
At the same time, economists say Democrats are overplaying the fiscal impact of eliminating the Bush tax cuts only for the rich.
Of the $3.7 trillion extending all the tax cuts would cost over the next decade, eliminating the tax cuts for the top 2 percent of earners would save $700 billion. That’s about $70 billion in 2011, when the federal deficit is projected to top $1.2 trillion.
