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Democrats Prepare Tax Cut Showdown in Senate in September

Political scientist Jonathan Bernstein wondered when the Democrats would get around to forcing bad votes on the Republicans in advance of the elections. I don’t think a Kagan cloture vote is a particularly bad one, especially considering that the Senate will vote on the nomination today, anyway. But I do think that forcing the entire GOP caucus to vote against tax cuts for the middle class has some political utility:

Senate leaders said Wednesday that debate would most likely begin in September over whether to let the Bush income tax cuts for the rich expire at the end of this year as scheduled, setting up a new battle just weeks before the midterm elections […]

Republicans, who have opposed the administration’s other stimulus spending and tax cuts, have seized on the recovery’s slowdown to argue that the Bush tax cuts should continue for wealthy Americans, emphasizing that the group includes some small-business owners who file their tax returns as individuals.

The administration and most Congressional Democrats counter that just 2 percent of small businesses have enough income to be affected should the top tax rates revert to their pre-Bush levels. More generally, they argue that extending the tax cuts for the rich would add to the nation’s dangerously rising debt; so do the tax cuts for everyone else, but Democrats point to nonpartisan studies showing that tax cuts for lower-income households are a far more effective way of spurring the economy because they spend the extra money while most wealthy taxpayers generally save it.

This debate is fundamental to the worldview of both parties, once based in facts and the other based in magical thinking about tax cuts for the rich paying for themselves. Republicans think they have Democrats boxed in, and would relish having them set a tax hike. But the tax cuts revert back to their pre-Bush levels if Republicans engage in gridlock. So actually, the Democrats seem to have the upper hand here. There will be a plan, probably to extend the tax cuts for those making under $250,000. Republicans will want an amendment on extending all of the tax cuts, perhaps for a set period of time, perhaps permanently. That will fail. Then cloture will come on the bill and Republicans will have a choice to make: vote against tax cuts for the middle class, or not. (Some Democrats would have to make that choice too, but outside of Evan Bayh and Ben Nelson I think they’d hold; witness Kent Conrad’s comments yesterday.)

The wrong vote will end Richard Burr’s career, and perhaps make a couple other vulnerable (Chuck Grassley comes to mind). But more important, it will set off the GOP as a wholly owned subsidiary of the rich. Witness Tim Geithner’s feisty rhetoric (I know, I don’t believe it either) on this point:

The country is less equal today than it was just a decade ago thanks in part to the Bush tax cuts, Treasury Secretary Timothy Geithner said Wednesday.

“[T]he policies put in place by the previous administration, prior to this great recession, have left us with a terrible legacy of challenges,” Geithner said during a discussion on fiscal policy at the Washington-based Center for American Progress. “And America is a less equal country today than it was ten years ago, in part because of the tax cuts for the top 2 percent put in place in 2001 and 2003.” […]

“The most affluent 400 earners in 2007 — who earned an average of more than $340 million dollars each that year — paid only 17 percent of their income in tax, a lower rate than many middle class families,” he said. “The legacy of the crisis is millions of unemployed Americans, idled factories, a national debt swollen by eight years of deficit spending and growing income inequality.

I don’t know that Geithner much cares about inequality, but he is certainly using the rhetoric of populism to draw distinctions between the parties on this point. He concluded with “There is no credible argument to be made that the purpose of government is to borrow from future generations of Americans to finance an extension of tax cuts for the top 2 percent.”

This is foremost an electoral maneuver. But it could lead to good outcomes as well.

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David Dayen

David Dayen

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