Wednesday, September 15, 2010

WSJ: Tax increase will affect every bracket, unless congress acts

Here are the facts:

Fact: No extension of any of the tax brackets has yet happened.

Fact: The senate is currently debating an extension, the jury is out as to which brackets will be extended if any, because we would also need this to pass in the House and for Obama to sign it if it even comes out of the Senate.

Senate Tax Showdown

Five Democrats have already said no.

While Nancy Pelosi can probably pass whatever she wants in the House—she's already written the Blue Dogs off as losers in November—the real tax action this fall will be in the Senate. That's where Minority Leader Mitch McConnell is working to gather enough votes to block a tax increase on capital gains, dividends and anyone making more than $200,000 a year.


So far Mr. McConnell has corralled all 41 Republicans to commit to extend all of the 2001 and 2003 tax rates beyond their current expiration date of December 31. That includes Maine's Olympia Snowe, who told reporters yesterday that "Where we start is to extend all the tax cuts. I think that's important." She added that she may entertain a tax increase on some people down the road, but not before a two-year extension because "to send any other message is going to have serious impact" on the tepid economic recovery.

Meanwhile, the list of Senate Democrats in favor of an extension is now up to five. Evan Bayh (Indiana), Kent Conrad (North Dakota) and Ben Nelson (Warren Buffett) were already on board, and this week Connecticut Independent-Democrat Joe Lieberman and Virginia's Jim Webb came around.

"The more money we leave in private hands, the quicker our economic recovery will be. And that means I will do everything I can to make sure Congress extends" the lower rates for another year, Mr. Lieberman said. That makes 46 votes against a tax increase, which ought to be enough to maintain a filibuster.

That leaves 54 Senate liberals either favoring the tax increase or remaining silent. Nearby we list nine of those incumbent Democrats who are running this year, most of them in tight races. The irony is that many of these Senators hail from relatively well-to-do states that would be hardest hit by the tax increase on investment income and upper-middle-income earners.

In New York and California, tens of thousands of middle-class couples make $250,000 a year during their peak earning years. Yet Kirsten Gillibrand, Chuck Schumer and Barbara Boxer seem delighted to sock it to their own constituents, much as they did on financial reform and ObamaCare. Ms. Boxer is struggling to win her fourth term against Republican Carly Fiorina, who is making the economy, jobs and taxes her major issues. c

Ms. Gillibrand, an appointed Senator who is under 50% support in the polls, could also have a tougher race than expected if the GOP nominee who emerged from last night's primary can raise enough money. Wisconsin's Russ Feingold, another three-termer who has spent his entire adult life in politics, could also be making a career decision if he votes to raise taxes.

It's going to be fascinating to see how these Democrats respond. On the one hand, they can vote to help the economy and their careers. On the other, they face the ideological demands of their President and union supporters whose priority is to stick it to "the rich" and spread the wealth. Voters will be watching.

Printed in The Wall Street Journal, page A18


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