WASHINGTON — President Obama called on Congress Monday to extend Bush-era tax cuts for middle-class families but not for wealthy Americans, using the bully pulpit of the White House to bring the tax issue back to the forefront four months before what is predicted to be a tight election.
Only families making less than $250,000 should get a one-year tax reprieve, Obama said, pitting himself against presumptive Republican rival Mitt Romney, who would like the extension to apply to everyone. In a two-front war against Romney over taxes, the president also challenged Romney Monday to release more of his tax returns.
Obama hammered home his campaign rhetoric of tax fairness and strengthening the middle class — a theme he has emphasized since his State of the Union address.
“Our biggest challenge right now isn’t just to reclaim all the jobs we lost to the recession, it’s to reclaim the security that so many middle-class Americans have lost over the past decade,” said Obama, flanked by middle-class families and small-business owners in the East Room of the White House. “What’s holding us back from meeting these challenges . . . it is a stalemate in this town, in Washington, about two very different views about which direction we should go in as a country. And nowhere is that stalemate more pronounced than on the issue of taxes.”
In recent weeks the Obama campaign has also sought to highlight Romney’s wealth by blasting his offshore financial holdings, accusing the former venture capitalist of shielding his income from taxes in Bermuda and Switzerland and calling on him to release more tax returns.
“Mitt Romney could be the first president in history to stash millions offshore,” said Ben LaBolt, Obama’s national press secretary, in a campaign video. “What taxes would Romney have paid if his money was invested here in America?”
Obama’s announcement Monday occurred following a disappointing report Friday on slow jobs growth and one day before he is to travel to Cedar Rapids, Iowa, to further promote his middle-class tax-cut cause. On Tuesday, he is expected to attend a round table at a private home and speak at a community college about rebuilding the economy around the middle class while asking millionaires and billionaires to “pay their fair share in taxes,’’ his campaign said.
Obama has often advocated taxing the wealthiest Americans at a higher rate by requiring those earning more than $1 million a year in wages and investment income to pay at least 30 percent in taxes, in his bid to target middle-class voters.
The plan, dubbed the “Buffett Rule” after billionaire investor Warren Buffett, who has said he should not be paying a lower tax rate than his secretary, was widely mocked by Republicans as an election-year gimmick.
On Monday Republicans also criticized Obama’s latest proposal, which some analysts say amounts to nothing more than political theater because Congress is unlikely to pass new tax legislation until after the election. The Romney campaign characterized Obama’s announcement as a bid to raise taxes following the worst job-creation quarter in two years.
Friday’s jobs report for the month of June showed a stalled economy for the third month in a row, with unemployment hovering at a stubborn 8.2 percent and only 80,000 jobs added.
“President Obama’s response to even more bad economic news is a massive tax increase,” said Andrea Saul, a Romney campaign spokeswoman. “It just proves again that the president doesn’t have a clue how to get America working again and help the middle class. . . . Unlike President Obama, Governor Romney understands that the last thing we need to do in this economy is raise taxes on anyone.”
Alan Feld, a Boston University law professor who specializes in tax law, called the Bush tax cuts a failed experiment that has contributed to the national deficit. But now would be the wrong time to allow them to expire because of the fragile economy, he said.
“A one-year extension for most taxpayers seems to be the most prudent,” Feld said.
If Congress fails to act, Obama said, the 98 percent of American families who make less than $250,000 a year would see their taxes go up by about $2,200 starting in January 2013 — a “big blow to working families” and a “drag on the entire economy.”
“That’s why I believe it’s time to let the tax cuts for the wealthiest Americans, folks like myself, to expire,” Obama said. “And by the way, I might feel differently — because it’s not like I like to pay taxes — if we were still in surplus.”
But given the national deficit, the country cannot afford to extend the tax cuts for everyone, he said. Some Democratic congressional leaders such as Representative Nancy Pelosi of California, the former speaker of the House, have argued in the past for setting the bar higher, at the $1 million mark. Pelosi and other Democrats issued statements Monday supporting the president.
Based on estimates from the Center on Budget and Policy Priorities, setting the threshold at $250,000 instead of $1 million results in an average of $37 billion per year in additional tax revenue over the next decade, said Mark Hopkins, senior economist at Moody’s Analytics.
“Since this is unlikely to pass the divided Congress anyway, it’s really all about framing the tax debate both for the election and for any future negotiations on a tax deal,” said Hopkins.
Obama said Congress should immediately pass the middle-class tax cut extension because it’s one area both parties agree on — and save the debate over tax cuts for the wealthiest Americans for after the election.
“Let’s agree to do what we agree on,” Obama said. “Let’s not hold the vast majority of Americans and our entire economy hostage while we debate the merits of another tax cut for the wealthy. . . . Right now our top priority has to be giving middle-class families and small businesses the security they deserve.”
Gary Burtless, an economist at the Brookings Institution, a nonprofit Washington think tank, said the posturing by Democrats and Republicans is unlikely to resonate with most middle-class voters, who he predicts will cast their ballots based on the rate at which people perceive the economy to be improving, rather than taxes.
“So much of this discussion runs like rain off a duck’s back to most people,” Burtless said.
“If the past is any prologue, [Congress is] not going to reach any sort of decision until December anyway, and maybe not until January of next year. In the end, President Obama may not have any say about this because he may be out of office.”