UPDATE 2-Pelosi hedges on timing of Bush-era tax vote

Fri Sep 24, 2010 2:41pm EDT

* Pelosi won't commit, or rule out pre-election vote

* Senate to leave before voting on Bush-era cuts

* Taxes rise for all if Congress deadlocks (Adds byline, analyst, economist comments, details)

By Kim Dixon and Donna Smith

WASHINGTON, Sept 24 (Reuters) - U.S. House of Representatives Speaker Nancy Pelosi said on Friday the House would vote this year on extending middle-class tax breaks, but she would not commit to vote before the Nov. 2 congressional elections.

"The American middle class will have a tax cut," Pelosi said at her weekly news conference. "It will be done in this Congress."

While not ruling out a pre-election vote, the comments strongly suggest a delay on the congressional vote until after the November midterm elections, where Democrats face steep losses in the House and possibly loss of one house of Congress.

Democrats have been divided on whether a vote on middle class tax cuts would help their chances in November or expose them to more Republican criticism that allowing the tax rates to rise on the wealthiest Americans could hurt some small businesses.

"We will retain the right to proceed as we choose," Pelosi said.

But House Majority Leader Steny Hoyer on Thursday downplayed the likelihood of a pre-election vote, saying voters knew where Democrats stand on the issue.

Lower tax rates for all American taxpayers enacted under former President George W. Bush expire at the end of year.

Under the plan advocated by President Barack Obama and most Democrats, lower tax rates would be extended only for the first $200,000 of an individual's income, or $250,000 for families.

Republicans want the lower rates extended for incomes above those amounts.

Both houses of Congress could leave Washington soon to campaign for the elections. The House was to meet Wednesday through Friday next week and could recess after that.

The Senate on Thursday put off its own vote on extending the tax cuts until after the elections. Democrats faced a potential Republican filibuster of their plan and some were uneasy that voting on extending only the middle-class tax cuts could hurt their re-election chances.

"Even those who don't make $250,000 want to be able to," said Democratic Sen. Dianne Feinstein, who backs holding off on the vote.

MORE GRIDLOCK

The tax cut debate has flared among lawmakers during a fierce congressional election season focused on the sluggish economy and a projected $1.3 trillion deficit.

A post-election vote raises the odds of even more gridlock. Republicans emboldened by election gains will likely make it more difficult for Democrats to back Obama's plan, and push harder for an extension of all the tax cuts.

"If anything, the rhetoric will become more heated, since the stakes for 2012 include the White House," said Paul Sracic, chair of the political science department at Youngstown State University in Ohio.

Likely gains by more conservative Tea Party candidates -- many of whom have advocated lower taxes and less government spending -- could box Democrats in even more.

Some worry the stalemate could lead to expiration of all the lower tax rates, an outcome neither party says they want. Republicans might want to wait until their new lawmakers are seated, in January.

Many economists say the fledgling economic recovery makes it a bad time for such broad tax increases.

"I think the consensus is building that one way or the other, large scale tax increases for everyone is highly undesirable," Citi economist Steven Wieting said. (Editing by Doina Chiacu)

FILED UNDER:
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Comments (1)
mbahde wrote:
Why don’t they find a compromise….the lower class/middle class taxes are only down 2-3% where as the wealthy are 4.5%…instead of just increasing the rich the full amount and keeping the tax cuts for lower…why not raise everyones, but just a little…like the lower/middle get raised 1/2-1% and the wealthy only get raised 2-2.5% instead of the full 4.5%. That way the government gets their money and there is no more squabbling on who is for the rich and who is for the poor and the middle are stuck right there in the middle.

Sep 24, 2010 1:24pm EDT  --  Report as abuse
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