WASHINGTON — After months of wrangling with Republicans over whether or not to extend tax cuts for the wealthy, Democrats are reportedly ready to throw in the towel and let them continue temporarily.
The Wall Street Journal reports Thursday that the “likely outcome” — as negotiations suggest — “includes a one- to three-year extension of the Bush-era income tax rates and a two-year extension of the business provisions, according to aides.”
Senate Republicans on Wednesday circulated a letter threatening gridlock on every Democratic initiative in the Congressional lame duck session until the majority party accepts additional tax cuts for the richest 2 percent of income earners.
Meanwhile, the White House has promised to try and compromise with Republicans on the issue. “We’re in the midst of productive discussions and negotiations around what I think everybody agrees is an issue that has to get done in taxes,” said spokesman Robert Gibbs. “I think we can get some substantive agreements.”
The tax breaks in dispute, enacted by the Bush administration, affect individual income earned above $200,000 and family income above $250,000. The Obama administration and Democratic leadership favor letting them expire on December 31, after which the top marginal tax rate would rise by 3 percent. Republicans adamantly support extending them.
Progressives have painted the measure as a deficit-busting giveaway to millionaires and billionaires that will do little for economic growth, while conservatives portray it as vital to job creation. The nonpartisan Congressional Budget Office estimates it will cost $70 billion annually while having a minimal stimulative impact on the economy.
Underscoring the upper-hand Democrats have in this debate are various public opinion polls, which in recent months have consistently shown Americans to be highly supportive of letting the high-end tax cuts expire as scheduled.
But Democrats have ambitions to extend unemployment benefits as well as repeal “don’t ask, don’t tell” and pass the DREAM Act in the lame duck session, and perhaps the party’s key players believe compromising on this issue might ease up the Republican blockade.
Democrats and Republicans do, however, agree on extending the tax cuts for the middle class, which are also set to expire on December 31. The GOP has threatened to vote against any measure that doesn’t also include continuing them for the wealthy.
House Democrats intend to hold a vote on a measure Thursday that would extend only the middle-class tax cuts but, it’s unclear whether it has the necessary support to pass.