At least seven Democratic senators have declined to rule out supporting a temporary extension of the Bush-era income tax rates, breaking with party leaders who have called for letting the rates expire for people earning more than $1 million per year. That gives Senate Republicans a chance to push a temporary extension similar to the deal Minority Leader Mitch McConnell (R-Ky.) struck with President Obama in December of 2010. Democrats running for reelection, such as Sens. Jon Tester (D-Mont.) and Joe Manchin (D-W.Va.), have declined to endorse their leadership’s call for a tax increase on wealthy families.
Instead, they want Congress to pass a broad package that would cut spending and reform the tax code, which they argue would inject new confidence into the private sector. “I would much prefer dealing with the tax code, with all the expenditures, in a bigger package similar to the Simpson-Bowles [deficit reduction] proposal,” Tester said. “If we can do that and we can roll out a big package that is significant, then we can do something with the tax rate from a reforming-it standpoint and do some things that really get our deficit and debt under control.”
Manchin sounded the same theme. “I’m totally for the Bowles-Simpson [plan] and will continue to work for Bowles-Simpson. We need to revamp the system and I think Bowles-Simpson is the pragmatic way to do it.” The blueprint crafted by former White House Chief of Staff Erskine Bowles and former Sen. Alan Simpson (R-Wyo.) would achieve $4 trillion in savings over 10 years through spending cuts and tax code reform. Bowles and former Sen. Judd Gregg (R-N.H.) are scheduled to brief a bipartisan group of senators this week on the need for a broad deficit-reduction package.
But many lawmakers are skeptical that a multitrillion-dollar entitlement and tax reform package can be passed during the compressed lame-duck session between Election Day and New Year’s. The most tempting option for some Democrats would be to extend the Bush tax rates temporarily to give Congress more time to work on a broader deal, which is what congressional Republican leaders have proposed. Extending all income tax rates for only one year would undercut the Democratic leadership’s plan to use their imminent expiration as leverage to move Republicans to accept some tax increases.