President’s tax plan draws little praise from Democrats

By Karoun Demirjian

Tuesday, Dec. 7, 2010 | 10:52 a.m.

The framework President Obama released toward a compromise on tax cuts is earning high praise from Republicans in Congress, but Democrats are staying comparatively tight-lipped as they pledge nonetheless to consider the new plan.

A spokesman for Senate Majority Leader Harry Reid said only that Reid "plans on discussing it with his Caucus tomorrow" in a statement released late Monday, after the administration unveiled its proposal.

Obama's plan extends the full roster of tax cuts at every income level for a period of two years, extends the federal government's amped-up unemployment benefits, which lapsed Nov. 30, for a period of 13 months, and cuts the employee Social Security tax rate from 6.2 percent to 4.2 percent.

"We had two choices: one is to let taxes go up on every American, or to see if we could come up with a compromise that was good for everybody," a senior administration official said Monday. "If we were going to have such a deal, this is an excellent deal."

A quartet of Democrat and GOP representatives from the House and Senate have been meeting since last week with top financial officials from the administration to hash out the details of a compromise plan to put before the Congress.

Lawmakers have been in a standoff for several months, with Democrats pushing for an extension of tax cuts only on the first $250,000 of income -- or maybe on the first $1 million, under an alternative proposal that Sen. Charles Schumer offered -- and Republicans insisting on a full extension of tax cuts at every income level on a permanent basis.

They have also been pushing for a conclusion to the tax cuts standoff before the new year, when the regime of tax cuts expires.

But few have been willing to budge.

Things seemed to devolve further over the weekend, after Reid kept the Senate in session Saturday to take votes on both Democrat-backed plans, both of which failed to secure enough support to override a filibuster.

That threatened to throw Reid's entire lame-duck plan into jeopardy. Last week, Republicans pledged to block any effort to move onto any other subject until the tax issue was resolved.

Now it appears there might be a light at the end of the tunnel.

"I am cautiously optimistic that our Democratic friends will have the same openness to preventing tax hikes that the administration has already shown," Senate Minority Leader Mitch McConnell said in a statement late Monday.

But moving forward will depend on Reid's willingness to bring up the proposal. He and Obama are close, and he appointed his most trusted financial mind in the Senate -- Max Baucus -- to represent him at the negotiations.

And even though he has continued to preach the gospel of the $250,000 ceiling, Reid has also seemed to leave open the possibility of reaching just this sort of ultimate deal in his rhetoric on tax cuts, as he has stressed the importance of "compromise."

If lawmakers are able to successfully compromise, it would represent the first time there has been cross-aisle cooperation between the White House and the Republican party on a large-scale issue.

If Reid agrees with the President's plan, and Republicans maintain their optimism, he's likely to be able to avoid a filibuster -- a rare occasion in the Senate these days. But he likely won't bring along all the Democrats.

After Saturday's vote, Schumer said there were some in the Democratic caucus who seemed prepared to continue to slog out the tax fight into January.