WASHINGTON – House Speaker John A. Boehner flatly rejected a Democratic proposal to preserve tax breaks for ordinary Americans – but not millionaires – saying that allowing a New Year’s tax hike on the wealthy would cost jobs.
Tax rates for virtually all American taxpayers are set to rise Jan. 1 unless Congress reaches an agreement, creating an issue that will help define the presidential race this fall between President Obama and former Massachusetts Gov. Mitt Romney, the GOP challenger. Lawmakers are preparing for a series of votes this summer, but are not expected to resolve the issue
Rep. Nancy Pelosi of California, the Democratic leader, pushed to start the debate sooner, saying Congress should not wait until the last moment.
“Get the show on the road,” Pelosi said Thursday, “so that we can remove all doubt that there will be a middle-income tax cut.”
In a break with Obama, Democrats in Congress have suggested keeping taxes low on incomes below $1 million. But the proposal has come under criticism from the left as liberal-leaning economists said it would raise only half as much revenue, about $466 billion over 10 years, as Obama’s proposal, which seeks to raise taxes on income above $250,000 per year.
Pelosi suggested Thursday hers was a starting position for debate, and she labeled as “stupid” a short-term resolution to keep tax rates low for a few months beyond Jan. 1, while talks continued.
But Republicans under Boehner have no interest in separating the lower-end tax rates from those on the upper end of the income scale, preferring to keep them as a package to gain leverage over Democrats as the votes commence this summer, before the November election.
“This proposal would kill jobs,” Boehner said Tuesday, arguing that many of those earning more than $1 million are small business owners who are vital to the recovering economy. “Raising taxes at this point in our recovery is a big mistake.”
Many small business owners organize their companies as so-called S-Corporations under the income tax code, which allow profits from their companies to be captured as personal income that is tax-free. But government accountants have said the growth of S-corps over the years has created too large a loophole in the tax code.