Obama Remains Against Tax Cuts For Wealthiest

by Mike Godfrey, Tax-News.com, Washington

25 November 2010

In an apparent contradiction to previous indications of a possible compromise on the renewal of the Bush tax cuts, United States President Barack Obama appeared to rule out their extension for the wealthiest during remarks he made to motor vehicle workers in Kokomo, Indiana.

As the lame duck session of Congress got under way, the main point of contention between the White House and the Republican party, who regained control of the House of Representatives earlier this month in the mid-term elections, is whether it will be possible to extend some or all of the individual tax cuts enacted under the presidency of George W. Bush, which are due to expire at the end of this year.

While Republicans have proposed extending the tax cuts in their entirety, since they believe that nobody, and particularly small business owners, should be subject to higher taxes as the pace of the economic recovery is still uncertain, both President Obama and the Treasury Secretary, Timothy Geithner have recently said that Congress should only “permanently extend" the Bush tax cuts for all those taxpayers making less than USD250,000 a year, due to the high fiscal cost entailed in their extension for those earning above that amount.

At the time, it was felt that the expression “permanently extend” left room for a compromise in, possibly, agreeing a temporary extension of all of the tax cuts for an initial period of two years.

In his latest remarks in Indiana, however, President Obama appears to have shifted to a more rigid position. While he recognizes that Democrats and Republicans have got to “put aside our differences” and “find places where we can agree”, and while he emphasized that both sides agree that “the last thing we can afford to do right now is raise taxes on middle-class families,” he was uncompromising in his stance.

He reiterated that he does not believe that the government “can afford to also borrow USD700bn to pay for an extra tax cut for the wealthiest Americans, for millionaires and billionaires. I don’t think we can afford it right now - not when we are going to have to make some tough decisions to rein in our deficits. That's going to require sacrifice from all Americans, including those who can most afford it.”

The President is due to meet with congressional representatives from both parties on November 30; a meeting which has been delayed by the Republicans for internal party reasons. While his latest comments may well be a negotiating tactic, with an eye to that meeting, it has also been noticeable that there have been other statements by Democrat leaders in the past few days against any compromise. That may presage more difficulty than expected in reaching an agreement during the next month.

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