WASHINGTON — US congressional leaders foreshadowed an election-year tax battle Thursday as House Speaker John Boehner nixed a Democrat proposal to vote on extending tax cuts for Americans earning under $1 million per year.
Under a proposal laid out last week in a letter to Boehner, Minority Leader Nancy Pelosi urged an immediate vote on extending tax rates for what she described as middle-class Americans, while allowing the Bush-era tax breaks on millionaires and billionaires to expire.
“I believe that raising taxes at this point in our recovery is a big mistake,” Boehner told reporters when asked about the letter.
“Even under Ms. Pelosi’s argument, half of those who would get this higher tax are small-business people,” Boehner said.
“At a time when we are trying to help small businesses create jobs, this proposal would kill jobs.”
In her May 23 letter, Pelosi argued that “Democrats believe that tax cuts for those earning over a million dollars a year should expire and that we should use the resulting revenues to pay down the deficit.”
The move by Pelosi, who preceded Boehner as House speaker, appears to be a break from President Barack Obama, who has supported a tax-cut extension for family incomes only up to $250,000.
Republicans want to extend the full range of George W. Bush-era tax cuts, and Boehner said there would be a House vote on such a plan in June.
Boehner angered Pelosi and Democrats in May by issuing a challenge over raising the debt ceiling — the authority for the government to borrow money — and warning that any increase in the ceiling, likely to be needed by year end, would have to be met dollar-for-dollar with spending cuts.
A stand-off over the debt ceiling last year led to the first-ever downgrade of the US credit rating.
On Thursday Pelosi warned a similar tactic this year would lead to “another deep recession.”
The Republican plan is “deja vu all over again,” Pelosi said.
“Tax cuts for the wealthy — trickle down, and it will create jobs. And if it doesn’t, so be it, that’s the free market,” she sneered.
Democrats argue the need to balance spending cuts with revenue generation in order to avoid a looming confluence of fiscal crises, but there may be push-back within the party against raising the tax break threshold.
The left-leaning Center on Budget and Policy Priorities (CBPP) reported Wednesday that Pelosi’s plan to hike the cut-off to $1 million “would lose nearly half of the revenue” that Obama’s proposal for households under $250,000 would raise, resulting in a revenue loss of $366 billion over the next decade.
Critics fear steeper cuts to government programs might then be necessary to fill the gap.
The so-called fiscal cliff at year’s end involves the expiration of the Bush-era tax cuts and extended unemployment benefits, the debt showdown, and automatic budget cuts — worked out in last year’s debt ceiling deal — which kick in unless Congress takes action.
The non-partisan Congressional Budget Office warned last week that the United States faces a likely recession in 2013 if Congress fails to stop the scheduled spending cuts and tax hikes by January.