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US Senators Spar Over Key Tax Cut

The U.S. Capitol building (file photo).
The U.S. Capitol building (file photo).

The White House and congressional Democrats continue to press for a federal-tax-cut extension that would benefit nearly all wage and salary earners, but especially the middle class. Paying for the extension remains a sticking point on Capitol Hill, where Republicans object to a proposed surcharge on millionaires.

Position reversal

It is a rare reversal of partisan and ideological positions: Democrats fighting to sustain a tax cut and Republicans raising objections.

Last year, it was Republicans who insisted that lower tax rates enacted under former President George W. Bush be extended for all income levels, and Democrats who said the top tax rate paid by the richest Americans should rise. In the end, all Bush-era tax cuts were extended, without any corresponding tax hikes or spending cuts to offset the fiscal impact.

At issue today are taxes collected to fund the federal program that provides income to retirees, known as Social Security. For 2011, those taxes were reduced by about a third to give Americans bigger paychecks and, it was hoped, stimulate economic growth.

Economic impact

Unless Congress acts, full Social Security taxes will be collected once again in 2012. Democratic Senator Kent Conrad of North Dakota says that would be disastrous for America’s fragile economic recovery.

"What the country needs right now is additional lift for the economy," he said. "We still have one-in-six Americans either unemployed or underemployed. We should not have a tax increase on the middle class. That just makes no sense."

Conrad spoke on the U.S. television program Fox News Sunday.

Last week, Senate Republicans defeated a Democratic proposal to pay for a Social Security tax cut extension by tax hike on millionaires. Senate Democrats defeated a Republican proposal for a similar tax cut offset by federal spending reductions.

Also appearing on Fox was Republican Senator Tom Coburn of Oklahoma, who argued that fixing the massive federal deficit requires fiscal discipline.

"The question the American people ought to ask is, 'Where is the backbone in Washington to actually pay for these extensions?' All we see coming out of Washington is a promise about collecting revenue in the future to pay for expenditures today. We ought to pay for that by decreasing spending now in other low-priority areas," he said.

Tax cuts for the wealthy

Democrats argue the Republican position shows they are only interested in preserving tax cuts for the wealthy. Republicans fire back that Democrats are fundamentally unwilling to reduce the size and scope of government in the U.S. economy.

President Barack Obama has suggested Congress remain in session until the Social Security tax cut is extended, even if that means keeping the legislature open through the upcoming Christmas holiday period. Kent Conrad announced on Fox that the Senate’s top Democrat, Majority Leader Harry Reid, is working on a compromise proposal to be unveiled this week.