November 18, 2010 / 3:57 PM / 7 years ago

Obama, Democrats meet at White House over tax cuts

* Democrats at odds over tax-cut strategy

* Bush-era cuts will expire this year without action

* Republicans want lower rates for all, including wealthy

WASHINGTON, Nov 18 (Reuters) - U.S. President Barack Obama meets leaders of his embattled Democratic Party at the White House on Thursday as they struggle to find a way to renew Bush-era tax cuts that are set to expire this year.

Democrats are scrambling to find consensus on the tax issue after losing control of the House of Representatives in the Nov. 2 congressional elections and seeing their majority in the Senate weakened.

While Democrats and Republicans want to extend the lower rates on the first $200,000 of a person’s income, they are divided over what to do with the top rates paid by the wealthiest 2 percent of Americans.

Republicans want to extend the tax cuts for all income brackets and have hardened their position, while Democrats have split on whether to extend the lower rates for the wealthy.

The cuts, brought in by President George W. Bush, will expire at the end of this year if Congress does not act.

Before the election, Obama supported the expiry of the lower rates for the wealthiest, saying the United States cannot afford tax breaks for the rich as the economy recovers slowly from recession and the budget deficit balloons.

Since then, Obama has signaled a willingness to compromise, suggesting a permanent extension for the lower- and middle-class income groups and possibly a shorter-term extension for wealthier Americans. [ID:nN16111274]

Republicans reject this approach and some liberal Democrats are not pleased, wanting Obama to take a harder line.

“We are looking to the president to lead on this and really stay firm,” Ohio Democratic Senator Sherrod Brown said on Wednesday.

House Speaker Nancy Pelosi is among those who insist on letting rates for the wealthy rise back to pre-2001 levels. Democrats re-elected Pelosi as their leader in the House on Wednesday, despite misgivings among some that the party needs a new face and direction.

The picture is less clear in the Senate, where some conservative Democrats have backed the extension of all of the lower rates.

Senator Max Baucus, the Democratic chairman of the Senate Finance Committee, has said he wants a vote on extending the lower rates before the end of the year.

“I believe that middle-income taxpayers should get their tax (cuts) extended, not the upper brackets. That’s my view,” Baucus said. (Reporting by Kim Dixon; Editing by John O’Callaghan)

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