* Lower tax rates expire at year-end with no action
* Pelosi, White House favor keeping cuts for middle class
* Part of debate over deficit-cutting versus stimulus (Adds detail on House positions; paying for tax cuts; Nelson)
By Kim Dixon
WASHINGTON, July 22 (Reuters) - U.S. House of Representatives Speaker Nancy Pelosi on Thursday affirmed her support for letting lower tax rates for wealthier Americans expire at year-end, despite opposition by several Senate Democrats who say the economy is too fragile for higher taxes.
Fiscally conservative Senate Democrats Evan Bayh, Kent Conrad and Ben Nelson all have said they believe lower tax rates for all income groups should be renewed when they expire at the end of the year.
Pelosi said that does not change her position.
“Our position has been that we support middle-income tax cuts. The tax cuts at the high end have increased the deficit enormously,” she said.
Her comments are part of a broad debate over whether to renew tax cuts enacted in 2001 and 2003 under former President George W. Bush that are set to expire at year-end. President Barack Obama and many congressional Democrats want to extend the lower rates for individuals earning less than $200,000 or couples making less than $250,000, but not for those earning more.
At the center of the debate among Democrats is whether economic stimulus or deficit reduction should be the top policy priority.
About 2 to 3 percent of Americans fit into the upper income categories.
Conrad said the first priority should be to extend the middle-class rates, acknowledging that the wealthier are less likely to spend the extra cash. But he said he is convinced the recovery is too uneven to raise taxes on the wealthy now.
“The weight of economic advice that’s been given to me says .. now is not the time to pivot in terms of raising taxes or cutting spending,” Conrad said.
There are also some Democrats in the House who have said they want to postpone raising taxes for wealthier individuals for two years.
A spokesman for Nelson said: “He supports extending the expiring tax cuts at least until the economy is clearly recovering and supports addressing them before the fall elections.”
There is a guessing game going on in Washington as to when the Democrats will address the tax issue. Some believe they will wait until after the November elections to avoid being accused of raising any taxes before voters head to the polls.
Because of budget rules, lawmakers need to find off-setting revenue to fund extending the lower rates for those in upper income groups, but not for the so-called middle class and under categories.
Conrad suggested waiving the budget rules to extend the tax cuts for higher-income Americans should be considered.
Nelson, who voted against a bill on extending unemployment benefits, citing concerns about the deficit, backs using unused funds from the $862 billion economic stimulus to help fund extending the lower rates for the wealthy.
Republicans back extending the tax cuts for all income groups and some have argued that deficits are acceptable if they fund tax cuts.
Pelosi noted Republicans tried to block the unemployment benefits extension by arguing that there should be funding for it, but not for the tax cuts for the wealthiest.
“We have a clear distinction here. If we want to lower taxes for the middle class, reduce the deficit and create jobs, extending the tax cuts at the high end are not in furtherance of reaching those goals.” (Additional Reporting by Susan Cornwell; Editing by Eric Walsh and Dan Grebler)