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‘Decoupling’ Strategy Could Provide Tax Cut Compromise

October 31, 2010

The White House and senior Democrats in Congress are reportedly weighing a compromise “decoupling” approach to the Bush tax cuts that could extend them for upper-income taxpayers on a temporary basis and for middle-class taxpayers permanently.

The talks, according to the Washington Post, have become a “hot topic” right now. Democrats in Congress have delayed introducing legislation on the Bush tax cuts until after the midterm elections. The tax cuts expire at the end of the year, so the bill would have to be passed during the “lame duck session” to avoid steep hikes in taxes showing up on taxpayers’ paychecks in January.

Under the "decoupling" compromise being discussed, couples making less than $250,000 a year and individual taxpayers earning under $200,000 a year would get a “permanent” extension of the Bush tax cut rates. Those making above those levels would get a temporary extension of a year or two.

President Obama has so far only publicly backed extending the tax cuts for those making less than $250,000 a year. Senate Minority Leader Mitch McConnell, R-Ky., has called for a permanent extension of the Bush tax cuts at all income levels, but other Republicans may be open to a compromise.

In return, Democrats hope to convince Republicans to support their proposals for making infrastructure investments and other job-creating measures to improve the economy. But much will depend on the outcome of Tuesday’s elections, as the balance of power is expected to shift in Republicans’ direction in at least the House.

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