President Barack Obama urged Congress to approve a one-year extension of Bush tax cuts for families making less than $250,000 a year, just as Congress returned from the July Fourth recess today.
The move is likely to set up another standoff with House Republicans, who have sought a one-year extensions of all the tax cuts. By contrast, Obama would allow tax rates to increase for higher earners.
“The country is being held back by a partisan stalemate in Washington, and nowhere is that stalemate more pronounced than on the issue of taxes,” Obama said in remarks today at the White House. “It’s time to let the tax cuts for the wealthiest Americans — folks like myself — to expire.”
Meanwhile, Gov. Romney spokesperson Andrea Saul called the president’s proposal “a massive tax increase.”
Following today’s announcement, Obama will spend part of the afternoon doing interviews with local television stations from states across the country, including Florida, Iowa, Kentucky, Louisiana, Nevada, New Hampshire, North Carolina and Wisconsin.
Later this month, Congress plans to vote to extend the expiring tax cuts for all income levels for a year and set in motion a process that would lead to a more comprehensive overhaul of the tax code in 2013. The bill isn’t expected to pass in the Senate, which is controlled by Democrats.
Senate Majority Leader Harry Reid expressed support for the president’s proposal. “Democrats and Republicans should be able to agree that protecting the middle class is the most important priority, so Republicans should stop holding these middle-class tax cuts hostage to extract more reckless giveaways for millionaires and billionaires,” Reid said.
If Congress doesn’t act, the top tax rate for ordinary income will increase to 39.6 percent from 35 percent. The top tax rate on capital gains will increase to 23.8 percent from 15 percent, and dividends would be taxed as ordinary income.