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Obama and tax cuts: How far toward GOP will he go?

President Obama appears to be open to working with Republicans to extend Bush-era tax cuts. Keeping today's lower tax rates for the wealthy, temporarily, appears to be on the table.

By Staff writer / November 12, 2010

U.S. President Barack Obama gestures during a closing press conference at the G20 Summit in Seoul, South Korea Friday, Nov. 12.

Yonhap News Agency/AP Photo

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President Obama appears to be open to working with Republicans to extend Bush-era tax cuts. That’s what he indicated Friday at a press conference in Asia, where he’s traveling. Mr. Obama reiterated that he plans to meet with congressional leaders at the White House next week and that item No. 1 on the agenda is the looming expiration of the lower Bush tax rates.

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“There may be a whole host of ways to compromise around those issues,” said the US president.

But what is Obama’s bottom line? How far toward the GOP’s position will he go?

IN PICTURES: Obama's Asia trip

Here’s the state of play at the moment: Before the election, Obama and many other Democrats campaigned on extending rate reductions only for the middle class, defined as those making less than $250,000 a year. That includes some 98 percent of taxpayers, according to Obama.

Republicans want the lower rates extended for everyone, including those making more than $250,000 a year. The wealthy include many small-business owners, who create most of America’s new jobs, according to the GOP.

On Thursday, Washington was atweetering over a Huffington Post report that suggested the administration was willing to cede this dispute to Republicans due to the GOP’s midterm election gains.

But the content of the story actually indicated that the administration may be moving only partway toward what Republicans want. The Huffington piece, based on an interview with White House senior adviser David Axelrod, said the administration was open to an across-the-board “temporary continuation” of Bush tax cuts, including those for the wealthiest taxpayers.

“We have to deal with the world as we find it,” said Mr. Axelrod, according to the piece.

The key word here is “temporary.” Some Democratic strategists have talked of trying to decouple the tax cuts for the wealthy and those for the middle class, by making an extension of the former temporary and an extension of the latter permanent.

Congress would not have to vote again on tax cuts for the middle class. But at some point, lawmakers would have to reconsider the tax cuts for the wealthy – and that might be a much more difficult thing to pass if not included in a package of cuts that applies to all taxpayers.

It is a clever strategy – perhaps too clever by half. If that is as far as the administration is willing to go toward compromise, it might not work. Last week, Senate minority leader Mitch McConnell refused to say whether he’d accept such a solution to the tax-cut impasse.

“Our view is, don’t raise taxes on small business. We would rather not do it at any time,” said Senator McConnell in a CBS broadcast interview.

At the same time, the administration is under heavy pressure from liberals who don’t want the White House to move too far, if at all, toward the GOP.

For instance, the website of the Progressive Change Campaign Committee, a liberal advocacy group, calls for its supporters to sign an electronic petition to “tell President Obama to fight – not cave – on this issue.”

“If you don’t fight on this issue Democrats may lose even more seats in 2012 – and possibly even the White House,” reads the petition.

IN PICTURES: Obama's Asia trip

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