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--- news (7/9/2012)
Obama seeks one-year extension for some of Bush tax cuts

(Reuters) - President Barack Obama will call on Monday for a one-year extension of Bush-era tax cuts for families earning less than $250,000 a year, seeking to put Republicans on the defensive and reinforce his campaign mantra of being a middle-class champion.

Obama's proposal is unlikely to sway his opponents in Congress, who have argued consistently that the Bush tax cuts should be extended for everyone, including higher earners.

The Democratic incumbent will make his proposal during a 11:50 a.m. statement at the White House.

Whether it gains traction or not, Obama's move achieves several political goals. It shifts the campaign conversation - at least for a day - from last week's meager jobs report and his handling of the economy to "tax fairness" and inequality in America.

It burnishes Obama's message of being the candidate who backs the middle class while Republicans and their presumptive presidential nominee, Mitt Romney, favor the wealthy.

It also sets a baseline for what is likely to be a months-long debate about deficit reduction.

The tax cuts enacted by Republican President George W. Bush, Obama's predecessor, will expire on January 1 without congressional action, part of a so-called fiscal cliff that could hit the U.S. economy alongside deep automatic spending cuts. Romney has suggested Congress wait to act on the issue until January, when he hopes to take office.

His campaign said on Monday Obama's move would amount to a "massive tax increase" on families, job creators and small businesses.

"It just proves again that the president doesn't have a clue how to get America working again and help the middle class," Romney spokeswoman Andrea Saul said.

Aside from the Republican reaction, Obama's move holds political pitfalls among his fellow Democrats, who are divided about how to address the issue.

House of Representatives Democratic leader Nancy Pelosi has suggested that the income threshold for extending tax extensions be set at $1 million a year rather than the $250,000 limit Obama wants.

Some Democrats oppose any extension, while others are wary of allowing taxes to rise for higher earners because of the impact it could have on small businesses, an argument that Republicans have stressed repeatedly.

Democratic strategist Doug Hattaway, an adviser to Hillary Clinton when she was a presidential candidate, said Obama's move was smart on substance and strategy.

"Middle-class families drive the economy and middle-class voters will decide the election," he said. "This helps the president continue to tell the story that he's doing everything he can for them, while Romney ships their jobs overseas."


Obama agreed to a two-year extension of all of the Bush tax cuts last year. U.S. Senate Republican leader Mitch McConnell said on Sunday the economy was worse now than it was when the parties agreed to the last extension. He argued for extending all of the cuts for a year.

"I negotiated with Vice President (Joe) Biden the two-year extension of the current tax rates that we're in right now," he said on CNN's "State of the Union" program.

"The president signed it because he argued that to let taxes go up would make the economy worse. We have a slower growth rate today than we had then."

The expiring tax cuts set up what could be another deeply partisan fight in Congress, where Republicans hold the U.S. House of Representatives and Obama's fellow Democrats narrowly hold the U.S. Senate. It is not clear whether any legislation would pass before the November election or after it.

Analysts warn the impact of rising taxes and lower federal spending could tip the economy back into recession. Data on Friday showed the unemployment rated stayed at 8.2 percent in June.

Republicans, who have made Obama's stewardship of the economy a key issue in the November 6 presidential election, argue that letting taxes on the wealthiest Americans rise would hurt job creation. They accuse Obama of engaging in class warfare.

Robert Gibbs, a senior adviser to Obama's campaign, defended the proposed extension on Monday as a way to help boost middle-income Americans and propel the U.S. economy.

"Millionaires and billionaires - they don't need a tax cut," he said on NBC's "Today" show. "They're not struggling in this economy. They've done well even as the middle class has shrunk."

Obama's campaign has portrayed Romney, a multi-millionaire former private equity executive, as out of touch with average Americans.

Representative Tom Price, a member of the House Republican leadership, told "Fox News Sunday" the House would pass legislation in July to preserve the Bush tax cuts for another year, a move he said Romney supports.

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