WASHINGTON — For months, President Barack Obama has stressed the budgetary rewards of eliminating tax breaks for the wealthy. But many Democrats see a more fundamental reason to let the Bush-era tax cuts expire in January: narrowing the growing divide between the rich and everyone else.
When Congress returns to Washington, a solid core of Democratic lawmakers says it will urge party leaders to seize a rare opportunity to reverse three decades of rising income inequality by resisting any effort to extend the cuts for the richest 2 percent of households.
Obama and Democratic leaders want to let those cuts expire. But they are playing down the social-justice angle — fearful, said Democratic congressional aides, of fanning conservative allegations that Obama is a closet socialist looking to redistribute wealth.
“I find it ironic that we’re nibbling around the edges on this issue,” said Rep. Raul Grijalva, D-Ariz., co-chairman of the House Progressive Caucus. “I talk about the deficit because it’s the party line right now. But this is a disparity issue. It’s about poverty. It’s about fairness. And, as Democrats, we need to stand for those things.”
Republicans, who want to extend the cuts for everyone, say the correct response to income inequality is not more taxes on the wealthy but greater opportunity for those at the bottom of the income scale. They accuse Democrats of waging “class warfare” in a bid to cling to power in the Nov. 2 congressional elections.
“The administration believes that we ought to pit one group of people — those who have less — against those who have more and vilify those who have been successful. That’s not what America means to me,” said Rep. Eric Cantor of Virginia, the second-ranking House Republican.
With the recovery flagging and some influential economists urging lawmakers not to raise anyone’s taxes, many analysts expect lawmakers to extend all the cuts, if only temporarily. One potential compromise: Democrats could offer a one-year extension of tax cuts for the rich in exchange for GOP support for additional measures to spur hiring, such as a payroll tax holiday or a package of business tax breaks that Obama recently proposed.
Redistributing wealth is a primary function of the U.S. tax code. Until the early 1960s, the top income tax rate hovered around 90 percent. It has since fallen fairly steadily, dipping to a low of 28 percent during the Reagan administration.
Soaring deficits prompted Presidents George H.W. Bush and Bill Clinton to reverse the trend, pushing the top rate to 39.6 percent. But in 2001, George W. Bush pushed it back down to its current level of 35 percent.
