President Barack Obama urged Congress on Monday to extend expiring tax cuts for most American households, injecting the issue of tax fairness into the 2012 campaign.
The president, speaking early this afternoon at the White House, again voiced support for allow tax cuts for households earning over $250,000 per year to expire at the end of 2012, while also preserving existing rates for households earning less than that.
“We don't need more top-down economics. We tried that theory ... we can't afford to go back to it,” the Obama said. “That's why I believe it's time for the tax cuts for the wealthiest Americans, including myself, to expire.”
Congress is likely to do anything but that, though. Republicans who control the House of Representatives quickly rejected Obama’s proposal as a tax hike, though the president sought to decouple the middle class tax cuts from the high-end breaks. Obama urged lawmakers to act now to extend most of the expiring tax cuts, and have a second debate – likely to be decided in November’s election – on the tax cuts for the wealthiest.
"My opponent will fight to keep them in place; I will fight to end them,” Obama said in reference to Mitt Romney, the presumptive Republican presidential nominee.
All of the tax cuts, which were first proposed by President George W. Bush, were set to expire at the end of 2010. After having initially resisted their extension, Obama relented and agreed to a two-year extension of the Bush tax cuts for all income brackets – a compromise that allowed the administration to advance some of its legislative priorities through that year’s lame-duck Congress.
At the time of that extension, Obama said he would refuse to again agree to any extension of the high-end tax cuts.
The announcement is rife with election year significance. Republicans have raised the specter of a tax increase that would spring into effect if the Bush tax cuts were allowed to expire at the end of this calendar year.
Though Obama's proposal would preserve existing tax rates for all but the wealthiest American households, Republicans still derided it as a massive tax hike -- especially on small business owners whose revenues are treated as personal income.
"President Obama’s response to even more bad economic news is a massive tax increase," said Romney campaign spokeswoman Andrea Saul. "The president's latest bad idea is to raise taxes on families, job creators, and small businesses. Almost half a million fewer Americans are working today than the day Barack Obama took office, and we've just come through the worst job creation quarter in two years."
In response to that charge, Obama said: "This isn't about taxing job creators; this is about helping job creators."
Moreover, Republicans accused Obama of looking to divert attention from last Friday's jobs numbers, which showed the economy added 80,000 jobs in June, a figure that fell somewhat below estimates.
Taxes have often been an effective political cudgel for the GOP to wield against Democrats in election years. Obama's announcement on Monday was ostensibly intended to defuse the looming tax fight at the end of this year, though it's unlikely that any legislation makes it to the president's desk before Election Day.
Obama's proposal, rather, doubles down on what Democrats view as a politically advantageous demand that the wealthy contribute a higher share of taxes, a sentiment that generally polls well. Nonetheless, Americans slightly favored Republicans on the issue of taxes in the June NBC News/Wall Street Journal poll. Thirty-four percent of respondents said they favor the GOP's approach to taxes, versus 32 percent who said that of Democrats.
Republicans on Capitol Hill have been eager to highlight, though, differences between Democratic lawmakers and the president on this very issue. Democratic leaders in the House and Senate have called on preserving tax rates for all households earning less than $1 million per year, a higher threshold than Obama's. This alternative proposal was born of politics, since it opens the door to Democrats' charge that the GOP wishes to preserve tax breaks -- literally -- for millionaires.
The president's push to extend the Bush tax cuts for households earning less than $250,000 per year is also meant to set up a contrast with Romney, whose proposal to cut marginal income tax rates by 20 percent in each bracket composes the cornerstone of his tax reform plan.
"Unlike President Obama, Governor Romney understands that the last thing we need to do in this economy is raise taxes on anyone. He has a plan to permanently lower marginal rates, help middle-class Americans save and invest, and jumpstart economic growth and job creation," said Saul, the former Massachusetts governor's spokeswoman.
Romney has also called for cutting the corporate tax rate to 25 percent and maintaining friendly tax rates on investment income. The presumptive Republican nominee has said that he would pay for the price tag of these cuts with an overarching tax reform package that would eliminate some loopholes and deductions.
But he's refused to specify what those changes might be, or how they would affect the nation's tax ledger. He told CBS last month that he would "go through that process with Congress" to determine which deductions and exemptions he would eliminate.
Romney has additionally weathered pressure from the Obama campaign to release more of his own tax records amid scrutiny of his overseas holdings. Romney released his returns from 2010, which showed he paid an effective tax rate of about 14 percent (because much of his income came from investments). Romney filed for an extension on his 2011 taxes, and his campaign said it would release them to the public when they're available, no later than October.
"The next president, in the next four years -- somebody's going to have to tackle comprehensive tax reform. And they're going to have to deal with sheltering income, like it appears Mitt Romney is doing in Bermuda, in the Caymans, in Switzerland," senior Obama campaign adviser Robert Gibbs said Monday on NBC's "TODAY" show. "I think the American people deserve to know what tax breaks and what sheltering each of these candidates is taking advantage of."