White House considering ‘decoupling’ top-tier tax cut – Most voters don’t believe it.

White House considering ‘decoupling’ top-tier tax cut

Cached:  http://www.washingtonpost.com/wp-dyn/content/article/2010/10/29/AR2010102906927.html?hpid=topnews

Washington Post Staff Writer
Friday, October 29, 2010; 9:26 PM

President Barack Obama said on Friday that his mission is to accelerate the economic recovery and he’s calling attention to a proposal he says would create jobs, grow the economy and help businesses.

With Republicans poised to gain ground in Tuesday’s elections, the White House is losing hope that Congress will approve its plan to raise taxes on the nation’s wealthiest families and is increasingly focusing on a new strategy that would preserve tax breaks for both the wealthy and the middle class.

According to people familiar with talks at the White House and among senior Democrats on Capitol Hill, breaking apart the Bush administration tax cuts is now being discussed as a more realistic goal. That strategy calls for permanent extension of cuts that benefit families earning less than $250,000 a year, and temporary extension of cuts on income above that amount.

The move would “decouple” the two sets of provisions, Democrats said, and focus the debate when tax cuts for the rich expired next year or the year after. Republicans would be forced to defend carve-outs for a tiny minority populated by millionaires, an unpopular position that would be difficult to advance without the cover of a broad-based tax cut for everyone, aides in both parties said.

“The concept of ‘decoupling’ is a hot topic right now,” said one senior Democratic aide.

The Bush tax cuts are set to expire in December. Republicans are pushing to extend them all, while President Obama has forcefully argued that the country cannot afford to keep tax breaks on income over $250,000 a year for families, or $200,000 for individuals.

Extending all the cuts would add nearly $4 trillion to deficits over the next decade. Extending only the middle-class cuts would drive the nation more than $3 trillion deeper into debt.

The battle over taxes will be reengaged when lawmakers return to Washington in mid-November. If Congress fails to act before the end of the year, virtually every taxpayer will see increased withholding take a bite out of their paychecks in January.

Democrats had hoped to deal with the issue before the election but could not agree on a strategy. House and Senate leaders said they backed Obama’s tax policy. But a sizeable group of Democrats – worried that the recovery was losing steam and fearful of hurting conservative Democrats in a tough election season – argued that all the cuts should be extended at least through 2011.

If Republicans take control of the House and make significant gains in the Senate, as many analysts predict, Obama and congressional Democratic leaders could find their ranks even more badly split. Some liberals are balking at the idea of voting to extend tax cuts they opposed when they were originally enacted in 2001 and 2003. Obama ran on a promise to repeal the upper-income cuts, and some Democrats say even one more year of tax breaks for the wealthy would amount to a betrayal.

Republicans, for their part, have no interest in undoing the Bush tax package, which was painstakingly designed to win approval in an evenly divided Senate. “If you break it apart, you undo the coalition,” said a Senate GOP tax aide, making it less likely that the upper-income cuts and other Bush breaks that Republicans say encourage investment would ever again be approved.

While advocating permanent extension, Republican leaders have said they would accept a two-year extension of all the cuts.

Administration officials said they have begun plotting strategy for the lame-duck legislative session but declined to comment on decoupling or another idea floated in recent weeks: embracing tax breaks for the rich in exchange for Republican support for additional economic stimulus.

The stimulus could take the form of Obama’s proposal to provide additional business tax breaks, which the president touted Friday during an event in Beltsville, Md. Or it could take the form of an extension of Obama’s signature tax break for the middle class, Making Work Pay, which is scheduled to expire in December, congressional aides said.

“Our only focus is on ensuring middle-class families wake up on January first with the knowledge that their taxes will not go up,” said Jen Psaki, a White House spokeswoman. “The president’s position is clear: We should give them that certainty, and do it without adding another $700 billion to the deficit to pay for an additional tax cut to millionaires and billionaires that we simply can’t afford.”

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Poll shows Americans don’t know economy expanded with tax cuts

Cached:  http://www.washingtonpost.com/wp-dyn/content/article/2010/10/29/AR2010102901403.html?sid=ST2010102907746

By Heidi Przybyla and John McCormick

(c) 2010 Bloomberg News
Friday, October 29, 2010; 5:05 AM

The Obama administration cut taxes for middle-class Americans, expects to make a profit on the hundreds of billions of dollars spent to rescue Wall Street banks and has overseen an economy that has grown for the past four quarters.

Most voters don’t believe it.

A Bloomberg National Poll conducted Oct. 24-26 finds that by a two-to-one margin, likely voters in the Nov. 2 midterm elections think taxes have gone up, the economy has shrunk, and the billions lent to banks as part of the Troubled Asset Relief Program won’t be recovered.

“The public view of the economy is at odds with the facts, and the blame has to go to the Democrats,” said J. Ann Selzer, president of Selzer & Co., a Des Moines, Iowa-based firm that conducted the nationwide survey. “It does not matter much if you make change, if you do not communicate change.”

The Obama administration has cut taxes — largely for the middle class — by $240 billion since taking office Jan. 20, 2009. A program aimed at families earning less than $150,000 that was contained in the stimulus package lowered the burden for 95 percent of working Americans by $116 billion, or about $400 per year for individuals and $800 for married couples. Other measures include breaks for college education, moderate- income families and the unemployed and incentives to promote renewable energy.

Still, the poll shows the message hasn’t gotten through to Americans, especially middle-income voters. By 52 percent to 19 percent, likely voters say federal income taxes have gone up for the middle class in the past two years.

“He’s all about raising taxes,” says poll respondent Jeanette Bagley, 74, a retired home health aide in a suburb of St. Paul, Minnesota. “He’s all about big government and big spending.”

The view that taxes have gone up is shared by a majority of almost all demographic groups, including 50 percent of independent voters, among the linchpins of Obama’s victory in the 2008 election.

Even a plurality of Democrats, 43 percent, holds this misperception. Overall, 63 percent of those who earn $25,000 to $49,999 say taxes have gone up, compared with 45 percent of those who earn $100,000 or more.

The poll demonstrates the tough odds for Democrats heading into the midterms. Republicans are poised to retake the U.S. House next week with a 47 percent to 44 percent edge among likely voters. Independents are driving the Republican advantage.

The heart of Obama’s voting base and the group he’s tailored most of his policies to, middle-income earners — or those who make $25,000 to $49,999 — feel more pinched by taxes, are gloomier about economic growth and more pessimistic the tax dollars lent to Wall Street banks will ever be repaid than their higher-income-earning counterparts.

In an October report to Congress, released as TARP turned two years old, the Treasury said it had recovered most of the $245 billion spent on the Wall Street bank part of the rescue, and expects to turn a $16 billion profit. In the Bloomberg poll, 60 percent of respondents say they believe most of the TARP money to the banks is lost and only 33 percent say most of the funds will be recovered.

“Anything that ever needs to be paid back it’s ¿let’s go after the middle class,'” says poll respondent Judith Ann Micone, a 55-year-old cosmetologist and Republican from Kalispell, Montana.

Women are slightly more skeptical than men that the funds will be recovered. Independents and Republicans are overwhelmingly skeptical. Even Democrats are mostly doubtful, with 48 percent saying the money will be lost, compared with 41 percent who say it will be recovered.

Separate from the aid for the Wall Street banks, the Treasury says the payouts for insurers such as New York-based American International Group Inc. will end with a small loss on investment, as will the bailout for automakers. Only the assistance to mortgage lenders, projected to reach about $45 billion, will never be repaid, Treasury says.

The perceptions of voters about the performance of the economy are also at odds with official data. The recession that began in December 2007 officially ended in June 2009, making the 18-month stretch the longest since the Great Depression. In the past year, the economy has grown 3 percent and is expected to show improvement in the second quarter of this year.

Voters aren’t seeing the better climate: 61 percent of poll respondents say the economy is shrinking this year, compared with 33 percent who say it is growing.

Charlene Miller, a 58-year-old unemployed nursery worker from Waterview, Maryland, said her impression is shaped by the state of jobs and wages and the fact that she’s been unemployed for two years.

“We’re sending too many jobs overseas and not paying Americans for their work,” says Miller, an independent who voted for Obama.

Older voters are more likely to view the economy negatively, with 69 percent of those age 55 and older saying it is shrinking, compared with 48 percent of voters under 35 who say so. For those 65 and older, it’s 71 percent. Those who earn less than $50,000 are more likely to view the economy negatively than those who earn more.

The Bloomberg National Poll, which included interviews with 1,000 likely voters in the November 2010 general election, has a margin of error of plus or minus 3.1 percentage points.

The impressions of these voters also are dissonant with other signs of economic improvement.

A year and a half after U.S. stocks hit their post- financial-crisis low on March 9, 2009, the benchmark Standard & Poor’s 500 Index has risen 75 percent, and it’s up 15 percent for this year.

The unemployment rate that’s hovered at or above 9.5 percent for 14 months is crowding out any positive news, said Bruce Oppenheimer, a political science professor at Vanderbilt University in Nashville.

“It spreads a dark cloud across anything else that you’re doing,” Oppenheimer said. “This won’t be a good election for Democrats.”

The poll reveals the failure of the Democrats to communicate their achievements even within their own party and the opposition’s triumph in painting the Obama administration as a failure, particularly on economic issues.

“The administration has said for a long time that the best politics was doing the right thing,” says Steve McMahon, a Democratic strategist. “It requires a lot more. These numbers show that the best politics is selling what you’re doing.”

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