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Democrats Break Ranks on Tax Cut Extensions

September 29, 2010

A group of 47 House Democrats has written to House Speaker Nancy Pelosi, D-Calif., asking to extend the soon-to-expire Bush tax cuts on dividends and capital gains, echoing a similar letter sent this month by 31 House Democrats that advocates extending the tax cuts for upper-income taxpayers.

As the midterm elections approach, incumbents are eager to avoid alienating voters who are worried that their taxes would rise with the expiration of the 2001 and 2003 Bush tax cuts. That includes not only Republicans, but many Democrats as well. It’s also one reason why the Democratic leadership in the House and Senate has decided to put off a vote on the tax cut extension until after the election.

The taxes on capital gains and dividends are due to rise from 15 percent to 20 percent once the 2003 tax cuts expire. The Obama administration wants to hold them to 15 percent for households making less than $250,000 a year and individuals earning less than $200,000 a year.

The letter, by Congressman John Adler, D-N.J., and signed by 46 other House Democrats, outlined the reasons for preserving the tax cuts. “By keeping dividends and capital gains tax rates linked and low for everyone, we can help the private sector create jobs and allow seniors and middle class households to save and invest more. A dividends tax increase would impede our nation’s economic recovery by decreasing the amount of capital that companies would have access to, thereby slowing the private sector’s ability to grow and create jobs.”

On Wednesday, 39 Democrats in the House joined 170 Republicans in objecting to adjourning before a vote could be held on extending the Bush tax cuts. Pelosi cast the deciding vote on the adjournment vote, squeaking by on a narrow margin of 210-209.

Depending on the election results in November, we are likely to see more Democrats and Republicans ready to break ranks with their party leadership when lawmakers return for a vote on the fate of the tax cuts.

Comments (2)
Yes, I believe there has been some talk of a compromise along those lines, such as raising the threshold to those making over $1 million. I wouldn't be surprised if some kind of deal on the threshold is reached so the extension can be passed before the end of the year. The longer the uncertainty goes on, the more trouble it's going to be for payroll departments to figure out the right withholding amounts for employees in January.
Posted by MikeCohn | Thursday, September 30 2010 at 9:10AM ET
Has there been any discussion of a compromise, say raising the definition of "rich" from $200,000/$250,000 to $400,000/$500,000, and then extending the cuts only for those whose incomes fall below that raised limit?

Still seems unfair for domestic partners living together to be shielded up to $400,000 while for married couples it's only $250,000.
Posted by quas | Thursday, September 30 2010 at 8:58AM ET
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