Political Capital with John Harwood

Dems: Waiting Till 2008 For "Taxing Politics?"


House Speaker Nancy Pelosi made some news in our interview yesterday on Power Lunch. There's been a spate of reports recently of the demise of Democratic proposals on Capitol Hill to raise taxes on the private equity industry. The speaker called those reports premature.

Yes, Senate Majority Leader Harry Reid has said there's not enough time now to move proposals to eliminate the favored tax treatment of "carried interest". But Ms. Pelosi told me that assessment applies only to THIS YEAR. In other words, she explained, it may surface again in 2008. That's when Democrats are likely to focus in earnest on the task of shielding middle-income taxpayers from the exploding burdens of the Alternative Minimum Tax.

Shielding them means making sure they don't have to supply an income stream that the federal government is counting on--which in turn means the government will seek to replace that money somewhere else. Could that somewhere else be the private equity sector? You bet it could.

And the more you think about it, the more it makes sense that Democratic Congressional leaders would delay this debate until 2008. The debate is largely about political positioning rather than making law anyway, since President Bush's veto pen can almost certainly block anything he deems an unacceptable tax increase.

By 2008 the two parties will be a pitched presidential battle; Democrats like the idea of matching up their defense of the middle class against Republicans support for "the rich." Republican strategists, for their part, think they can stick the "tax and spend" label back on the Democrats even if the tax hikes in question are aimed at the top of the income scale.

In other words, game on.

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