Democrats Threaten Jan. 1 Tax Hike for All Americans

(Newsroom America) -- Democrats on Monday said they are prepared to allow massive new taxes to take effect Jan. 1 unless Republicans agree to tax hikes on their own.

Sen. Patty Murray of Washington said Democrats are willing to let Bush-era tax cuts on all earners expire on New Year's Day, which in effect means the party is prepared to allow the country to plunge over a "fiscal cliff," as many in the nation's capital have said would happen.

In addition to the tax increases, tens of billions of dollars in automatic spending cuts will also take effect, as part of a deal reached last summer to raise the nation's borrowing limit - it's debt ceiling.

Lawmakers on both sides of the aisle are angling to shift some of those cuts away from vital areas like defense, as well as temporarily extend the Bush-era cuts on at least some Americans.

Some economists have warned that the twin tsunami of massive new taxes and spending cuts would hurl the nation back into recession - just a few short weeks before President Obama, if he is reelected, or President-elect Mitt Romney, if he wins the November election, to take the oath of office.

Some conservatives say defiant Democrats, should they lose big this year as the party did in 2010, and a lame-duck president could take their angst out on Republicans by adopting the strategy Murray is suggesting.

In several campaign speeches, Obama has called out the nation's top earners, saying they need to do more to "pay their fair share" of the nation's income taxes, a theme echoed by Murray on Monday.

"So if we can't get a good deal, a balanced deal that calls on the wealthy to pay their fair share, then I will absolutely continue this debate into 2013 rather than lock in a long-term deal this year that throws middle-class families under the bus," she said in remarks plans to make Monday afternoon at the Brookings Institution.

Murray is head of the Democratic Senatorial Campaign Committee, the campaign arm for Senate Democrats.

In her remarks, which were reported by Fox News and other outlets, Murray said if all tax cuts were allowed to expire, it would diminish the Republican argument that the Democrats' plan is the same as a tax hike, because come the end of the year, any change to the tax code would be a tax cut.

"We will have a new fiscal and political reality," she said. "If the Bush tax cuts expire, every proposal will be a tax cut proposal and the pledge (to not raise taxes) will no longer keep Republicans boxed in and unable to compromise.

"If middle-class families start seeing more money coming out of their paychecks next year -- are Republicans really going to stand up and fight for new tax cuts for the rich? Are they going to continue opposing the Democrats' middle-class tax cut once the slate has been wiped clean? I think they know this would be an untenable political position. And I hope this pushes them to come to the table with real revenue now before being forced to the table if we don't get a deal before the New Year," she said in the remarks.

Republicans have pointed out that the Democrats - led by Obama - are simply playing a game of class warfare, noting that IRS data indicates the nation's top 50 percent of earners pay nearly all of the country's income taxes already. Taxing them again - instead of allowing them to keep more money so they can expand businesses and hire more people - is counterproductive to a recovery.

Obama and Democrats only want tax cuts to remain in effect for people making less than $250,000 a year, but many of those earners, based on IRS data, already pay no income taxes, GOP lawmakers argue.

In fact, the IRS says about 49 percent of American earners pay no income tax.

Nonetheless, the Democrats are banking on a political strategy they hope will force Republicans on the defensive over the issue, leading them to either agree to only partial tax cuts or have to explain to voters why they oppose raising taxes on all income levels, analysts say.

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