* Lower tax rates for all expire at year end
* Some division among Democrats as to impact
* Former Treasury Secretary Rubin weighs in
(Adds comments from Rubin, other details)
By Kim Dixon
WASHINGTON, July 21 A fiscally conservative
Democrat who chairs the U.S. Senate's budget committee on
Wednesday said he supports extending all of the tax cuts that
expire this year, including for the wealthy.
"The general rule of thumb would be you'd not want to do
tax changes, tax increases ... until the recovery is on more
solid ground," Senator Kent Conrad said in an interview with
reporters outside the Senate chambers, adding he did not
believe the recovery has come yet.
Conrad's comments are sympathetic with Republican arguments
against raising taxes amid a fledgling economic recovery. They
frame a debate gaining steam over whether stimulus to bolster
the economy's recovery, or deficit reduction, should be the top
Other Democrats are still sensitive to budget worries.
Senate Finance Committee Chairman Max Baucus, another
fiscally conservative Democrat, earlier this month questioned
whether the country could afford to extend the tax cuts for the
wealthier groups, citing the yawning budget deficit.
Lawmakers are mulling the renewal of tax cuts enacted in
2001 and 2003 under former president George W. Bush that expire
at the end of this year. President Barack Obama and his
Democratic allies in Congress want to extend the lower rates
for individuals earning less than $200,000 or couples making
less than $250,000.
About two to three percent of Americans fit into the upper
The federal government has run deficits for several years,
with the 2010 budget expected to come in more than $1 trillion
in the red. The issue has stalled several spending bills in
Congress, including extension of unemployment insurance now
being debated in the Senate.
Conrad said that it will be tough to extend the top tax
cuts, given worries about the deficit and because under budget
rules, lawmakers must find offsetting revenue to pay for the
lower rates for wealthier Americans.
But the North Dakota Democrat who also is on the Senate
Finance Committee, said he thinks waiving so-called pay-go
rules to extend the upper income rates should be considered.
"Pay-go is not just a line in the sand," he said. "There is
a reason that you have a pay-go waiver, which requires 60
Democratic Senator Evan Bayh also recently questioned
whether taxes should be raised on the wealthy, citing the
Without action, tax rates will rise for all income groups,
to 15 percent, 28 percent, 31 percent, 36 percent and 39.6
percent, from the current categories of 10 percent, 15 percent,
25 percent, 28 percent, 33 percent, and 35 percent.
By letting the Bush tax cuts for those in the upper income
categories expire and boosting their capital gains and dividend
tax rates back to 20 percent, the Obama administration expects
to generate about $678 billion over 10 years.
MOST LIKELY TO SPEND
Conrad later said the first priority should be extending
the middle class rates, acknowledging that the wealthier are
less likely to spend the extra cash.
Most economists agree with that proposition.
Former Treasury Secretary Robert Rubin, who served under
President Bill Clinton, also weighed in on the issue on
"I would do what President Obama has proposed to do, which
is increase the rates on top two brackets to where they were
under President Clinton and I don't think that would pose a
threat to the economy." he said.
Extending the tax cuts for wealthier Americans would also
include keeping the dividend tax rate from rising to 40
percent, the level it reverts to under current law with no
Dividend-paying companies such as AT&T (T.N) are lobbying
to prevent the jump to 40 percent.
"We're continuing to do spadework to educate members about
the potential for the tax rate going up," said Jim McCrery, a
former Republican member of the tax-writing Ways and Means
Committee in the U.S. House of Representatives and now a
lobbyist for a group of such companies.
Baucus has voiced support for keeping the dividend rate
from going back to 40 percent but has not been specific.
(Additional reporting by Joseph Giannone in New York)
For a factbox on key tax issues, see: [N13219477]
(Reporting by Kim Dixon. Editing by Robert MacMillan and Carol