Democrats need to come together on taxes

Obama's fight to end the Bush rates for the rich pits him against more than two decades of GOP anti-tax absolutism

Published July 10, 2012 11:39AM (EDT)

In the battle over the Bush tax cuts that President Obama kicked off Monday, Republicans have one thing on their side: discipline.

It’s been 22 years since a Republican member of Congress voted to raise income taxes. There’s a good reason for this: When George H.W. Bush made a deal with Democrats to raise taxes in 1990, it triggered a GOP civil war, with the anti-tax absolutists claiming victory. Since then, the party’s congressional ranks have been split in two groups: those who adamantly believe that any and every revenue increase will wreck the economy, and those who fear the primary challenge and ostracism that would come from challenging this belief.

For Obama to get his way before the scheduled expiration of the Bush rates at the end of this year, it will require Republicans to relax more than two decades of obstinacy. After all, no matter what happens in the November elections, Republicans will control the House during the lame duck session. It would be up to the GOP leadership whether to allow a vote on the partial extension Obama seeks, and it would require GOP votes to pass it.

Here, then, are three potential scenarios for how the tax fight will play out if Obama wins a second term. (If Mitt Romney were to win, Republicans would presumably retain control of the House and likely win the Senate too, and all of the Bush-era rates would probably be safe going forward.)

1. Republicans cave: This is what Obama is banking on. The idea is to make the question of whether the wealthy should pay more central to the general election, allowing the president to claim a mandate if he prevails in November. That’s why Obama framed his call for ending the Bush rates for the top 2 percent this way on Monday:

In many ways the fate of the tax cut for the wealthiest Americans will be decided by the outcome of the next election. My opponent will fight to keep them in place. I will fight to end them. That argument shouldn’t threaten you. It shouldn’t threaten the 98 percent of Americans who just want to know that their taxes won’t go up next year.

This would allow Obama to spend November and December reminding Americans that he campaigned on a pledge to ask the top 2 percent to pay more while sparing everyone else from a tax hike. Republicans, presumably, would stand their ground at first, demanding that the tax rates be extended for everyone and flirting with letting all of the rates expire. All of the usual intraparty pressure to maintain a hard-line anti-tax posture would still apply – initially. But think back to the end of last year, when Republicans toyed with allowing lower payroll tax rates to expire. Obama, who was then weaker politically than he would be as a newly reelected president, turned the heat up on them and they folded, nervous that middle-class Americans would blame them for what would have amounted to a $1,000 annual tax hike. If anything, that dynamic would be more pronounced in this year’s lame duck session.

2. Obama and the Democrats cave – again: Right now, Obama is calling for the Bush rates to be extended for everyone making $250,000 or less. In an encouraging sign for the White House, two top Democrats on Capitol Hill who had been proposing a $1 million threshold, Nancy Pelosi and Chuck Schumer, both quickly fell into line on Monday.

But there are still some potential trouble spots within the Democratic Party for Obama, particularly on the Senate side, where a handful of senators from Republican-friendly states could be reluctant to go along. Think: Ben Nelson, Bill Nelson, Joe Manchin, Jim Webb, Mark Pryor, Jon Tester, Claire McCaskill and Joe Lieberman (even though he’s technically an independent). Some of them will be retiring at the end of the lame duck session, while others will still have to worry about their political futures. For a variety of reasons, they might balk at giving Obama everything he wants, even coming off an Obama victory. Some Democrats from marginal districts in the House could do the same.

The question, then, is how committed Obama is to the $250,000 threshold. Will he be open to negotiating and adjusting it upward, to allow “centrist” Democrats to brag that they moved him toward the middle? Or is this a bottom-line issue for Obama, who (don’t forget) took enormous heat from his own party for signing off on a complete extension of the Bush rates two years ago?

3. No one does anything: Maybe the fear of voting to raise taxes that drives Republican members of Congress survives an Obama victory in November, and the party’s united front endures. The GOP-led House would then pass an extension of all the rates and reject (or not even hold a vote on) the partial extension Obama wants, but the Democratic-controlled Senate wouldn’t follow suit, producing a stalemate. If that stalemate were to push beyond the end of the year, all of the tax cuts would automatically expire, resulting in a de facto tax increase for everyone. But that would also mean that any subsequent effort to undo the rate hike for those making under $250,000 would amount to a pure tax cut, even if the top 2 percent were left out. Could this be the sequence of events that allows Republicans to give Obama what he wants without technically breaking their resistance to higher taxes? (Lawrence O’Donnell discussed this scenario on his show last night.)

By Steve Kornacki

Steve Kornacki is an MSNBC host and political correspondent. Previously, he hosted “Up with Steve Kornacki” on Saturday and Sunday 8-10 a.m. ET and was a co-host on MSNBC’s ensemble show “The Cycle.” He has written for the New York Observer, covered Congress for Roll Call, and was the politics editor for Salon. His book, which focuses on the political history of the 1990s, is due out in 2017.

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