With a torpid job market and a fragile economy threatening his re-election chances, President Obama is changing the subject to tax fairness, calling for a one-year extension of the Bush-era tax cuts for people making less than $250,000.
Mr. Obama plans to make his announcement at the White House on Monday, senior administration officials said. The ceremony comes as Congress returns from its Independence Day recess, and as both parties and their presidential candidates head into the rest of the summer trying to seize the upper hand in a campaign that has been closely matched and stubbornly static.
House Republicans plan to vote this month to extend for a year all of the Bush tax cuts, for middle- and upper-income people.
The president’s proposal could also put him at odds with Democratic leaders like Representative Nancy Pelosi of California and Senator Charles E. Schumer of New York, who have advocated extending the cuts for everyone who earns up to $1 million. And it will most likely do little to break the deadlock in Washington over how to deal with fiscal deficits, an impasse that has only hardened as Republicans sense a chance to make gains in Congress this fall.
But by calling for an extension for just a year, Mr. Obama hopes to make Republicans look obstructionist and unreasonable. Trying to bounce back from another weak jobs report on Friday, he also hopes to deepen the contrast with his challenger, Mitt Romney. On Friday, the president said Mr. Romney would “give $5 trillion of new tax cuts on top of the Bush tax cuts, most of them going to the wealthiest Americans.”
From their stronghold in the House, Republicans plan to vote this week to repeal Mr. Obama’s health care law, hoping to energize their base even though they know that the campaign to abolish the law, which the Supreme Court upheld, stands no chance in the Democratic-led Senate. Republicans also renewed their call for an overhaul of the tax code.
“You know, what we ought to be doing is extend the current tax rates for another year with a hard requirement to get through comprehensive tax reform one more time,” the Senate minority leader, Mitch McConnell of Kentucky, said on Sunday on the CNN program “State of the Union.”
The struggle to frame the tax debate comes as the campaign moves into a period, only four months before the election, when the perceptions of voters begin to harden. Polls show a persistently tight race, with Mr. Romney closing in on Mr. Obama in certain swing states but with neither candidate able to break out decisively. Control of Congress is also up for grabs, with Mr. McConnell saying on Sunday that he believed the Republicans had a 50-50 chance to regain control of the Senate.
To find a compromise with Republicans on which Bush tax cuts to extend, Ms. Pelosi, the House minority leader, and Mr. Schumer, a member of the Senate Finance Committee, favor making $1 million the cutoff. Above that level, Mr. Schumer has said, people are not likely to spend the savings from lower taxes and help the economy.
Administration officials said they did not believe that the difference between the White House and these Democratic leaders was a big obstacle. They said that whether to use $250,000 or $1 million as a cutoff was more a matter of strategy than a “religious debate,” in the words of one official, who added that many other Democrats favored $250,000.
The White House hopes to squeeze maximum political mileage out of the White House event, surrounding Mr. Obama with families and workers who would benefit from the extension. On Tuesday, he will take his message to Iowa, the battleground state that turned him into a serious presidential contender in 2008.
In Cedar Rapids, Mr. Obama plans to visit the home of Jason and Ali McLaughlin, a high school principal and an account manager at a document-scanning company, a campaign official said. The McLaughlin family, with a combined income of $82,000, would face an extra $2,000 burden next year if the tax cuts on the middle class expired as scheduled, the campaign said.
White House officials insisted that Monday’s move was more than politics. They said it would ease anxiety over the “fiscal cliff” — the combination of tax increases and automatic spending cuts that are scheduled to kick in at the end of this year. That one-two punch, economists say, could deal a heavy blow to an already tender economy unless the White House and Congress work out some kind of compromise.
Proposing a one-year extension, a senior official said, recognizes that Mr. Obama and the Republicans are not likely to resolve the larger debate over whether to extend the Bush tax cuts for everyone or, as Mr. Obama has long advocated, just for the middle class. That debate is likely to be decided at the ballot box, where a victory by Mr. Romney would almost certainly enshrine all the tax cuts.
“To the degree that there is concern about the economy, we’re saying, ‘Let’s extend the middle class tax cuts for a year,’ ” said Gene B. Sperling, director of the White House’s National Economic Council. “Economically, extending tax cuts to those workers will have the most effect on them and the strongest impact on the economy.”
A one-year extension for people making under $250,000 would cost the government $150 billion in revenue, the administration estimates, an amount that would be added to the deficit. In a point of comparison, economists estimate that letting the cuts expire for people above that threshold would generate $850 billion over 10 years.
While Mr. Obama returns to the tax issue this week, House Republican leaders will press forward Wednesday with a vote to fully repeal his health care law, testing their faith that they can make the law part of their attack on Democratic economic policies against evidence that swing voters want to move past the fight.
Just as Mr. Obama needs to worry about divisions on the tax bill, some Republicans are in disagreement over the wisdom of relitigating the health care law. Some Republicans, facing re-election in swing districts, are openly suggesting that some measures should remain. Representative David B. McKinley, a Republican freshman from West Virginia, said prohibitions on lifetime coverage caps and on discrimination against people with pre-existing medical conditions should “absolutely” stay in force, even if health care costs would have to rise.
“If it means increasing my premiums, so be it,” he said. “That’s what insurance is about.”
Mr. Romney’s supporters on the Sunday talk shows hammered away at the idea that Mr. Obama is at fault for the poor economy. Representative Tom Price, Republican of Georgia, said Mr. Romney supported preserving all of the Bush-era cuts for another year because he believes “that will stimulate the economy and provide certainty out there in the job market.”
For Mr. Obama, the biggest advantage of the tax proposal may be simply to move the political discussion off the job market. On his bus tour through Ohio and Pennsylvania last week, the president took pains to present himself as a guardian of the middle class, whose most cherished childhood memories included raiding the ice machine at a Howard Johnson while on a Greyhound tour of the United States.
On Friday, however, when the latest poor jobs number was reported, Mr. Obama was back to talking about the long road to recovery.
Tagged: Tax Cuts