In break with Obama, 47 House Dems say they want tax rates unchanged on investment income

By Stephen Ohlemacher, AP
Tuesday, September 28, 2010

47 House Dems side with GOP on investment taxes

WASHINGTON — Forty-seven House Democrats — enough to give Republicans a victory on taxes if the issue came to a vote — are breaking ranks with President Barack Obama by calling on party leaders to continue Bush-era tax cuts on investment income.

The lawmakers, led by Rep. John Adler, D-N.J., have sent a letter to House 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.

The letter shows that many Democrats, some of them vulnerable in the upcoming elections, are unwilling to follow Obama on taxes.

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 several vulnerable freshmen and members of the conservative Blue Dog coalition.

The letter highlights divisions among Democrats over their party’s message on taxes just five weeks before congressional elections in which Democrats will be fighting to maintain majorities in both the House and Senate. Some Democrats have decided it is better politically to distance themselves from Obama and Pelosi as they campaign to keep their jobs.

The letter also raises fresh doubts about how Congress will address the expiring tax cuts when lawmakers return to Washington for a lame duck session after the election.

The tax cuts on investments were part of a sweeping package enacted under 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.

Some Democrats are wary of supporting Obama’s plan to let taxes rise for the wealthiest Americans, fearing they would be accused of supporting a tax hike. Other Democrats believe they have a winning message of fiscal responsibility while making the rich pay more after years of relative prosperity.

“It is imperative that the House of Representatives be given a chance to vote on the expiration of the 2001 and 2003 tax cuts for the middle class before we adjourn,” Reps. Bill Pascrell Jr., D-N.J., and Mike Capuano, D-Mass, wrote in a letter to House leaders.

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 No. 1 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.

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