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Biden indicates shift to $1 mln threshold for 2013 tax increases

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By Patrick Temple-West and Richard Cowan

WASHINGTON, Oct 12 (Reuters) - Did Vice-President Joe Bidenshift on the Obama administration's tax increase plan for thewealthy?

And if he did, was it a signal that Democrats are offeringto strike a quick deal with Republicans on one of the mostdifficult year-end fiscal decisions Washington faces?

President Barack Obama has called for keeping tax rates thesame for families making less than $250,000 annually and raisingthem for those above that level.

But during a debate on Thursday with Republican vicepresidential candidate Paul Ryan, Biden signaled a possiblechange from that figure, saying tax increases would start withmillion-dollar earners - a level possibly more palatable tolawmakers in Congress.

"The middle class will pay less and people making a milliondollars or more will begin to contribute slightly more," Bidensaid, describing the Obama campaign's tax proposal.

"Just let taxes expire like they are supposed to on thosemillionaires," Biden said later in the debate. "We can't afford$800 billion going to people who (are) making a minimum of $1million."

The president's fiscal 2013 budget proposed ending formerPresident George W. Bush's tax cuts for families with annualincomes above $250,000.

For these taxpayers the tax rate would go up to 36 percentand 39.6 percent under the Obama plan. The top individual taxrates are currently at 33 percent and 35 percent.

All the Bush-era tax cuts are set to expire at the end of2012 if nothing is changed. These tax increases along with deepspending cuts make up the "fiscal cliff," which threatens to putthe economy back into recession next year unless Congress andthe White House negotiate a solution.

The $1 million threshold for a tax increase might garnermore support with Democrats in Congress.

In May, House of Representatives Democratic leader NancyPelosi floated a plan to raise taxes on million-dollar earners.This caused a stir because it represented a retreat fromDemocrats' longstanding position of raising taxes on thosemaking more than $250,000.

That lower threshold can be problematic for lawmakersrepresenting states such as New York, where a high cost ofliving can put a $250,000 income in the middle class.

CONGRESS CONSIDERATIONS

Democrats and Republicans in the Senate might find supportfor a tax increase that hits fewer families.

A bipartisan group of senators is holding ongoing meetings,trying to craft a comprehensive deficit-reduction plan.

A source with knowledge of the group's deliberations toldReuters on Friday that a deal that would extend the Bush taxcuts for everyone except those making more than $1 million couldhave enough support to pass the Senate.

But the source, who asked not to be identified, added thatthere was "no way" the Republican-controlled House ofRepresentatives would go along.

Ryan, a member of the House, said the Obama administration'stax increases would hurt the small businesses that payindividual income taxes.

Under the president's plan, taxes would increase to 44.8percent for small businesses, Ryan said.

"Watch out middle class, the tax bill is coming to you,"Ryan said, speaking directly into the camera.

(Additional reporting by Thomas Ferraro and Kim Dixon. Editingby Christopher Wilson)

((Patrick.Temple-West@thomsonreuters.com)(202-354-5841))

Keywords: USA CAMPAIGN/TAXES