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Debate over taxes heats up in Congress

August 4, 2010 11:29:06 AM PDT
A soaring deficit and the weak economy have resulted in a fierce political battle in Washington over taxes and whether to raise them.

The Bush era tax breaks were broad and across the board and they're due to expire this year. Speaker of the House Nancy Pelosi and President Barack Obama are pushing to let tax cuts for the wealthiest Americans expire and Republicans are calling that crazy.

The tax cuts that went into effect in 2001 and 2003 reduced income tax rates across the board, eliminated the estate tax, cut capital gains taxes, doubled the child tax credit and expanded tax incentives for education.

The president and most congressional Democrats want to roll back those tax cuts for those making more than $250,000 a year.

"I don't see any reason why we should renew a tax cut that only gives a tax cut to the wealthiest people in America, increases the deficit and doesn't create jobs," Pelosi said.

Republicans argue that letting any of the reductions expire, amounts to a tax hike that would be disastrous for the fragile economy.

"I think to raise taxes on people who create jobs in the middle of a 9.5 percent unemployment rate is frankly crazy," former Speaker of the House Newt Gingrich said.

But the secretary of labor under President Clinton and advisor to President Obama Robert Reich says the richest Americans aren't creating jobs.

"They're not putting it into jobs, they're sending it abroad they are outsourcing jobs, they're putting into new technologies to replace jobs or their buying back their own shares of stock," he said.

There is a lot of money at stake. The non-partisan Congressional Budget Office estimates extending all of the Bush tax cuts would cost $3 trillion in lost revenue over 10 years.

But Republicans are threatening to hold the middle class tax cuts hostage to force Democrats into supporting a temporary extension for all the tax cuts.

"So we look forward to the debate over the appropriateness of raising taxes in the middle of a recession between now and the election," Senate Minority Leader Sen. Mitch McConnell, R, Kentucky said.

And ABC7's political analyst Bruce Cain says the Republicans have a good shot at winning this one.

"On the face of it, the facts favor Obama, but what we know is the Republicans seem to be much better at messaging than the Democrats, that they have the ability though Fox News and the blogging and though talk radio to get their message across," he said.

Cain noted any sort of tax increase message is dangerous in an election year.

President Obama was able to sell it against John McCain, but moderate blue dog Democrats in the Senate are feeling a good deal more skittish this election season.


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