Veto? (photo: mith_y / flickr)

White House officials reiterated a vow made in the past about the fiscal cliff, but in much stronger terms, saying that President Obama would veto any bill related to extending or offsetting the expiring fiscal measures if it didn’t include allowing the top two marginal tax rates, over $250,000 of income, to return to 36% and 39.6%.

Freed from the political and economic constraints that have tied his hands in the past, Obama is ready to play hardball with Republicans, who have so far successfully resisted a deal to tame the debt that includes higher taxes, Obama’s allies say.

In the days after the November election, the tables will be turned: Taxes are scheduled to rise dramatically in January for people at all income levels, and Republicans will be unable to stop those automatic increases alone […]

Administration officials declined to say whether the veto threat will stand if Obama loses the election.

If this threat were designed for the campaign, you’d think the President would have said it in front of the cameras when 67 million people watched the last debate. He has been consistent in saying that he would not extend the Bush-era tax cuts over $250,000. This is among the first times his Administration has said they would veto anything without that increase in tax rates.

The outcome of the fiscal cliff in the near term is very much tied to the election. The leverage changes completely depending on the incoming President and the incoming Congress. So threats like this should be filed away until we know that outcome.

Republicans prefer base-broadening tax reform that lowers rates, along the lines of Mitt Romney’s proposal of an across-the-board 20% tax cut paid for with deductions. Chuck Schumer mucked that up by declaring “tax reform” of that type a trap. Now President Obama is vowing to veto any fiscal changes without letting the tax rates on the top 2% increase. This puts the parties in far different negotiating positions, and portends gridlock in the future.

However, the leverage does change after January 1 if all of the Bush-era tax cuts expire. Then Democrats could put forward a large tax cut package that neglects the top marginal rates. Republicans could resist, but they would at that point be voting against a tax cut rather than a tax increase, a situation they would find harrowing and potentially damaging.

But the election will determine who really has the upper hand. So stick this one in your pocket until November 7.

White House officials reiterated a vow made in the past about the fiscal cliff, but in much stronger terms, saying that President Obama would veto any bill related to extending or offsetting the expiring fiscal measures if it didn’t include allowing the top two marginal tax rates, over $250,000 of income, to return to 36% and 39.6%.

Freed from the political and economic constraints that have tied his hands in the past, Obama is ready to play hardball with Republicans, who have so far successfully resisted a deal to tame the debt that includes higher taxes, Obama’s allies say.

In the days after the November election, the tables will be turned: Taxes are scheduled to rise dramatically in January for people at all income levels, and Republicans will be unable to stop those automatic increases alone […]

Administration officials declined to say whether the veto threat will stand if Obama loses the election.

If this threat were designed for the campaign, you’d think the President would have said it in front of the cameras when 67 million people watched the last debate. He has been consistent in saying that he would not extend the Bush-era tax cuts over $250,000. This is among the first times his Administration has said they would veto anything without that increase in tax rates.

The outcome of the fiscal cliff in the near term is very much tied to the election. The leverage changes completely depending on the incoming President and the incoming Congress. So threats like this should be filed away until we know that outcome.

Republicans prefer base-broadening tax reform that lowers rates, along the lines of Mitt Romney’s proposal of an across-the-board 20% tax cut paid for with deductions. Chuck Schumer mucked that up by declaring “tax reform” of that type a trap. Now President Obama is vowing to veto any fiscal changes without letting the tax rates on the top 2% increase. This puts the parties in far different negotiating positions, and portends gridlock in the future.

However, the leverage does change after January 1 if all of the Bush-era tax cuts expire. Then Democrats could put forward a large tax cut package that neglects the top marginal rates. Republicans could resist, but they would at that point be voting against a tax cut rather than a tax increase, a situation they would find harrowing and potentially damaging.

But the election will determine who really has the upper hand. So stick this one in your pocket until November 7.

David Dayen

David Dayen