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Tax cut ‘political reality’: Do Democrats really have to cave?

Is it not possible that, if congressional Democrats hold the line, 98 percent of taxpayers will blame Republicans for holding their tax rate hostage to the wishes of the least needy 2 percent?

Dave Leonhardt of the New York Times purports this morning to explain why the Dems will be screwed if they don’t make a quick deal with the Repubs on the expiring tax cuts. It makes little sense to me, but the explanation goes like this:

In the lame duck session, the 58 Senate Dems need only two Repub turncoats to beat a filibuster and close a deal. Leonhardt seems to assume that the Dems can’t get any Repub votes if they stick to their longstanding proposal to renew the Bush tax cuts for the roughly 98 percent of all families that have taxable incomes below $250,000, but allow the rates to revert to Clinton-era levels on the roughly 2 percent of families that make more than a quarter million dollars a year. (Did I mention that that’s after all deductions?)

(A Dem talking point that also happens to be true: Even the wealthiest families would continue to get some benefit from the Bush tax cuts — specifically, they would pay the lower rate on the first quarter million dollars a year of income. But on the dollars they earn above $250K, the Dem proposal would jack their marginal rate from the current 35 percent back up to the 39.6 percent they were paying in the year 2000.)

Well the Dems just ain’t gonna get away with that, says Leonhardt, and they will really regret it if they don’t close a deal this month before the Repubs take over the House, at which point, he writes, the Dems will have little choice but to give the Repubs exactly what they want, which is the extension of all the Bush tax cuts for all incomes up to infinity.

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Before that happens, Leonhardt writes, the Dems might be able to get the two votes they need to make the deal in the lame-duck session (he nominates the notoriously moderate Scott Brown of Massachusetts and the retiring George Voinovich of Ohio) if they offer to extend all the Bush tax cuts to incomes up to $1 million.

The $250,000 cutoff would raise about twice as much revenue (Dem word choice should be “reduce the deficit by about twice as much”) as the $1 million cutoff.

The leftier wing of the Democratic Party hates this idea, which is the current leading symbol of the left’s frustration with Obama’s leadership. I spoke to a liberal group out in Minnetonka the other night and I was struck by how angry they are at the unwillingness of Obama and other Dems to stand and fight.

They can’t believe — and I might as well confess that this is how it feels to me — that the vast majority of the lower-earning 98 percent have so much sympathy with the tax problems of the upper 2 percent that it becomes politically impossible for the Dems to just stick with their position and, if necessary, blame the Repubs for their intractable devotion to the worries of the wealthy if no deal is reached.

Leonhardt has clearly been talking to key senators and administration officials, and they just don’t see it that way. He explains the “political reality” that all the angry lefties have “skipped over,” which is what will happen if the Dems don’t do whatever they need to get a deal in the lame duck session:

“When the new Republican House majority arrives in January, it will be able to make its first order of business a retroactive tax cut — forcing President Obama and Senate Democrats to choose between a purely Republican plan and an across-the-board tax increase…

“Much of the recent commentary about the tax cuts has skipped over this political reality. It’s instead focused on how tough the Democrats should be and whether they should insist on the expiration of all the Bush tax cuts on income above $250,000 a year.”

 Now here’s the key to the “political reality.”

“But that’s no longer one of their options. Unless they believe they will benefit more than Republicans from a standoff in which taxes go up, which is hard to believe with a Democrat in the White House, their only choice now is among various versions of retreat.”

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Is it not possible that, if the Dems hold the line, the 98 percent will blame the Repubs for holding their tax rate hostage to the wishes of the least needy 2 percent? Does the public really buy the Repub talking point that all those rich folks are small business owners who are just itching to start hiring if they can only get “certainy” about the future of their tax rates? (Listen for it, “certainty” is mentioned every time a Repub senator addresses this issue. But the future rates will be just as “certain” if the Repubs cave to the Dems as vice versa.)

If Leonhardt’s “political reality” is the real situation, how can the Dems hold any line? In the next two years, they will need Republican votes to do anything legislatively. The Repubs are very good at holding their lines.