WASHINGTON – The White House and Republican lawmakers set the terms for a looming tax debate Sunday, coalescing around a possible temporary extension of existing income tax rates that would protect middle-class and wealthy Americans from sharp tax increases next year.

President Obama reiterated his opposition to a permanent extension of current tax rates for individuals making more than $200,000 a year and married couples making more than $250,000.

“It won’t significantly boost the economy, and it’s hugely expensive,” he said aboard Air Force One as he returned from an Asia trip. “So we can’t afford it.”

He acknowledged, though, that Republicans have “some strong feelings” about making the tax cuts for the wealthy permanent. “If they feel very strongly about it, then I want to get a sense of how they intend to pay for it,” Obama said.

Top White House adviser David Axelrod, appearing on two Sunday talk shows, was carefully silent on the possibility of extending current tax rates for the short term. He said he wants to leave negotiations to Obama and members of Congress.

“He wants to sit down and talk about this,” Axelrod said. “There is no bend on the permanent extension of tax cuts for the wealthiest Americans.”

A compromise would put off fundamental questions about taxes for the time being, virtually guaranteeing their prominence as campaign issues heading into the 2012 presidential election. That debate also would dovetail with a more profound discussion over how to rein in deficits and reduce the nation’s escalating debt.

Congress returns this week for a lame-duck session that is expected to stretch into December. But the GOP has additional leverage because it will begin the new year with Republicans in charge of the House and with more members in the Senate.

Senate Minority Leader Mitch McConnell has introduced legislation that would extend the current tax rates permanently, but on Sunday he signaled an openness to negotiate.

“I’m willing to listen to what the president has in mind for protecting Americans from tax increases,” McConnell, R-Ky., said in a statement.

Two prominent Republican senators conceded Sunday that the best Congress might be able to accomplish in the coming weeks is a short-term continuation of the current tax rates, set under President George W. Bush in 2001 and 2003.

“If the president wants to compromise on a two- or three-year extension if that’s all we can get out of the president, and he is the president, so we’ll work with him on that,” said Jim DeMint, R-S.C., a leader of his party’s conservative wing.

Likewise, John McCain, R-Ariz., said he could fathom a short-term extension of all the tax cuts. He voted against the Bush tax cuts, saying they disproportionately benefited the wealthy and didn’t rein in spending.

“They should be extended until we are out of this recession,” McCain said. “At such time, we can look at other tax hikes.”

In fact, the recession officially ended in June 2009, but the recovery has been slow, with joblessness stuck at 9.6 percent.

Moderate Sen. Mark Warner, D-Va., a former entrepreneur worth millions of dollars, has proposed letting tax rates expire for the top 2 percent of earners while enacting targeted business tax cuts instead.

“The problem with the two-year extension is extensions have a tendency to end up becoming permanent, and most economists would say giving folks like me an additional tax cut might not be the best value,” he said.

 

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