WASHINGTON – A group of 47 House Democrats are telling party leaders they want to continue Bush-era tax cuts on investment income, breaking ranks with President Barack Obama and exposing divisions among Democrats over their party's pre-election message about taxes.
The lawmakers, led by Rep. John Adler, D-N.J., have sent a letter toHouse Speaker Nancy Pelosi saying they strongly support extending the current tax rates on capital gains and dividends.
"Raising taxes on capital gains and dividends could discourage individuals and businesses from saving and investing," said the letter, dated Friday and released Tuesday. "We urge you to maintain the current tax rate for both dividend and long-term capital gains taxes."
Tax cuts enacted in 2003 set the top tax rate on capital gains and dividends at 15 percent. Those tax cuts expire at the end of the year, and Obama wants to let the top tax rate on capital gains and dividends increase to 20 percent for individuals making more than $200,000 and married couples making more than $250,000.
But if all 47 Democrats who signed the letter side with Republicans, they could prevail in extending the investment tax rates for all taxpayers, including the wealthy. The letter was signed by a several vulnerable freshman and members of the conservative Blue Dog coalition.
The tax cuts on investments were part of a sweeping package enacted under former President George W. Bush that lowered income taxes for families at every income level. All the tax cuts expire at the end of the year.
Obama and Democratic leaders in Congress want to extend the tax cuts for individuals making less $200,000 and married couples making less than $250,000. Republicans and a growing number of rank-and-file Democrats want to extend them all — even those for the wealthy — at least temporarily.
Democratic leaders in Congress had been pushing for a vote to extend middle-class tax cuts before lawmakers go home to campaign for the Nov. 2 congressional election. But action on the tax cuts was postponed until after the election when Democrats could not agree on how to proceed.
With no vote on the tax cuts scheduled before the election, Democrats are left writing letters to their leaders to publicize their positions.
"The Speaker has stated clearly that Congress will extend middle-class tax cuts this year," Pelosi spokesman Brendan Daly said. "There is no question that Congress will do so."
Republicans, meanwhile, say it is irresponsible for Democratic leaders to send lawmakers home without addressing the Bush tax cuts.
"I think it's a dereliction of duty for Speaker Pelosi to adjourn this Congress without addressing the number one question on the minds of Americans and small businesses, and that is, what's my tax rate going to be?" said House Republican Whip Eric Cantor of Virginia.