Who will get Bush tax cuts? Congress can't decide.

Unable to agree on who should be eligible to continue to receive the Bush tax cuts, which expire Jan. 1, President Obama and congressional leaders decided to convene a panel Tuesday.

Scott J. Ferrell/Congressional Quarterly/Newscom
From left, Senate minority leader Mitch McConnell (R) of Kentucky, House minority leader John Boehner (R) of Ohio, and House minority whip Eric Cantor (R) of Virginia wait in the White House after meeting with President Obama. They discussed the Bush tax cuts with Obama.

President Obama and congressional leaders on Tuesday tasked a six-man panel with finding a compromise on extension of the Bush tax cuts.

The president met with congressional leaders of both parties in a gathering Mr. Obama called “productive," and Republican leaders called “frank.” There was no deal on the Bush-era tax cuts – which Republicans want to extend for all families and Obama wants to extend only for families making less than 250,000.

But both sides committed to extending at least some of the Bush-era tax cuts before the 111th Congress winds down in December.

Two Democrats and two Republicans – one each from the House and Senate – will join Treasury Secretary Timothy Geithner and Jacob Lew, who directs the White House Office of Management and Budget, to “break the logjam,” Obama said.

Both parties assigned their A-listers to the new panel. Republicans appointed Sen. Jon Kyl of Arizona, the deputy Senate Republican leader, and Rep. Dave Camp of Michigan, the top Republican on the tax-writing Ways and Means Committee. Democrats tasked key committee chairs: Sen. Max Baucus of Montana, who chairs the Senate Finance committee, and Rep. Chris Van Hollen of Maryland, the incoming head of the Budget committee.

The leaders "would do anything to avoid hashing all this out on the floor of the Senate,” says Ross Baker, a political scientist at Rutgers University in New Brunswick, N.J.

Republicans are united on the principle that no American should face a tax increase in a recession. After gaining control of the House and increasing their ranks in the Senate in midterm elections, Republicans say that the American people are behind them and appear in no mood to compromise.

Republicans united, Democrats divided

Meanwhile, many – but not all – Democrats are rallying around the principle that middle-class tax cuts should be extended. Yet they are divided on what, exactly, constitutes the middle class.

Sen. Charles Schumer (D) of New York proposes extending tax cuts to all but those earning more than $1 million. It makes for a cleaner case that Republicans favor tax cuts for millionaires.

But Senate majority leader Harry Reid is holding out for an up-or-down vote on extending tax cuts with the $250,000 cutoff point. “The $250,000 middle-class vote is extremely important," he said in a briefing with reporters on Tuesday.

“This is where the diversity of the Democratic Party becomes a confounding element,” says Professor Baker. “You’ve got Max Baucus from Montana and Chuck Schumer from New York and Mary Landrieu from Louisiana all with different views of wealth and prosperity. Senators are reflecting the views of those they represent.”

In some parts of the country, $250,000 doesn’t look that rich. “I hear all the time in New Jersey that there are a lot of families with a teacher and a policeman in the family who end up in that range. They don’t consider themselves rich,” says Rep. Rush Holt (D) of New Jersey. But he still favors a $250,000 cutoff point.

“There have been and will be inequities among the states,” he adds. “We’ve got to raise revenue to pay down the deficit. Even if you wanted to do it all by cuts you couldn’t."

'We can't afford any of these tax cuts'

Other Democrats question whether any tax cut is appropriate at a time of soaring deficits. “We can’t afford any of these tax cuts,” says Rep. Bobby Scott (D) of Virginia. “It is hard to imagine that extending all of the tax cuts at a cost of $3.7 trillion is fiscally irresponsible but extending $3 trillion worth of tax cuts [to families earning less than $250,000] is somehow fiscally sensible."

There is broad agreement on one point, at least: that uncertainty about tax rates that take effect in just a month is worrying voters, troubling businesses, and hurting the economy.

“Congress creates too many tax cuts that are enacted for just a year,” says Senator Baucus, who favors a $250,000 cutoff point. “There’s too much uncertainty created by acts of Congress.”

The panel is expected to begin meetings as early as Wednesday morning. If members fail to come to terms on a plan, the issue will likely be resolved on the floor of the House and Senate, where Democrats, until January, still hold a majority.

A final deal could also include an extension of unemployment insurance that expires Nov. 30, affecting some 2 million families.

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