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

By Patrick Temple-West and Richard Cowan

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

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

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

But during a debate on Thursday with Republican vice presidential candidate Paul Ryan, Biden signaled a possible change from that figure, saying tax increases would start with million-dollar earners - a level possibly more palatable to lawmakers in Congress.

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

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

The president's fiscal 2013 budget proposed ending former President George W. Bush's tax cuts for families with annual incomes above $250,000.

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

All the Bush-era tax cuts are set to expire at the end of 2012 if nothing is changed. These tax increases along with deep spending cuts make up the "fiscal cliff," which threatens to put the economy back into recession next year unless Congress and the White House negotiate a solution.

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

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

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


Democrats and Republicans in the Senate might find support for 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 told Reuters on Friday that a deal that would extend the Bush tax cuts for everyone except those making more than $1 million could have enough support to pass the Senate.

But the source, who asked not to be identified, added that there was "no way" the Republican-controlled House of Representatives would go along.

Ryan, a member of the House, said the Obama administration's tax increases would hurt the small businesses that pay individual income taxes.

Under the president's plan, taxes would increase to 44.8 percent 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. Editing by Christopher Wilson)