US Sen Conrad Calls For Postponing Tax Increase On Rich
First Published Wednesday, 21st July 2010 06:31 pm - © 2010 Dow Jones
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By Martin Vaughan
Of Dow Jones NEWSWIRES
WASHINGTON -(Dow Jones)- Sen. Kent Conrad (D., N.D.) a senior Senate Democrat with influence over tax and budget policy, said Wednesday that Congress should not allow taxes on the wealthy to rise until the economy is on a more sound footing.
Conrad told Dow Jones Newswires in an interview outside the Senate chamber that Democrats should cancel plans to let the top individual income tax rates and capital gains rates rise for the wealthy at the end of this year. He said a tax increase might imperil an economy already weakened by the effects of persistent unemployment and turmoil in European debt markets.
"As a general rule, you don't want to be cutting spending or raising taxes in the midst of a downturn," Conrad said.
"At the same time, we know that very soon we've got to pivot and focus on the deficit," he said. "But it probably is too soon to cut spending or raise taxes."
Conrad, who is the chairman of the Senate Budget Committee and sits on the tax-writing Finance Committee, is the most senior Democrat to call for extending all of the tax cuts enacted under President George W. Bush, including those for the wealthy.
His comments underscore widespread divisions among Democrats regarding how, or when, to deal with the tax cuts, which are set to expire at the end of this year.
Democratic congressional leaders and President Barack Obama say they want to extend tax cuts for the middle class while letting rates for the wealthy rise.
But they are locked in an internal debate over whether to attempt to extend at least the middle-class tax cuts in the fall, before the congressional elections, or to wait and deal with them in a "lame-duck" session of Congress.
Legislation that extends only the middle-class tax cuts would leave Democrats vulnerable to attacks from Republicans that they are raising taxes on small businesses, some of whom pay taxes at the highest individual income tax rate.
But postponing action until after the election hands the GOP a potentially even more damaging message--Democrats have not acted to prevent a looming tax increase on the middle class.
"Everybody knows the clock is ticking down. No one is oblivious to the fact that there is an election coming up," said Sen. Ron Wyden (D., Ore.).
Finance Committee members from both parties are slated to discuss next steps on the expiring tax cuts in a Thursday meeting.
On Tuesday, Conrad voiced worry that a tax increase on the wealthy could harm the economy in a closed-door meeting of Finance panel Democrats. One person present at that meeting said other senators didn't endorse his views.
Democratic leaders have downplayed any negative economic effect of raising taxes on the rich, and argued that the nation needs the revenue to begin to get the soaring budget deficit under control.
"I think the debt is the threat," Conrad said in response to those concerns. "But the immediate, highest-priority threat is a double-dip recession."
Under the plan put forward by Obama, the top income tax rate would rise in 2011 to 39.6% from 35%. Capital gains and dividend rates would rise to 20% from 15%, for those with incomes above $200,000, or $250,000 for married couples.
-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; email@example.com