House Majority Leader Steny Hoyer said Tuesday that tax increases will eventually be necessary to address the nation's mounting debt, raising a difficult election-year issue as Democrats fight retain control of Congress.
In the shorter term, Hoyer (D-Md.) raised the possibility that Congress will only temporarily extend middle-class tax cuts set to expire at the end of the year. He pointedly suggested that making them permanent would be too costly.
Tax cuts enacted under former President George W. Bush are scheduled to expire at the end of the year, affecting taxpayers at every income level.
President Barack Obama proposes to permanently extend them for individuals making less than $200,000 a year and families making less than $250,000— at a cost of about $2.5 trillion over the next decade.
"As the House and Senate debate what to do with the expiring Bush tax cuts in the coming weeks, we need to have a serious discussion about their implications for our fiscal outlook, including whether we can afford to permanently extend them before we have a real plan for long-term deficit reduction," said Hoyer, a Maryland Democrat.
The tax cuts will be a big political issue in many congressional elections this fall, providing potential fodder for both political parties. Democratic leaders have yet to lay out a schedule for dealing with the tax cuts, but many rank-and-file Democrats want to extend them before the elections, so they can campaign on passing tax cuts for the middle class.
Republicans argue that many of the high earners who would face tax increases under Obama's plan are small business owners struggling to stay afloat in a tough economy.
If the Democratic-controlled Congress doesn't extend the tax cuts before the elections, Republicans are ready to pounce, highlighting the looming tax increase that awaits nearly every U.S. taxpayer in January. Democrats would be left in the awkward position of promising to extend the tax cuts in a lame duck session following the elections, after nearly two years of inaction by the current Congress.
In the short term, government spending has been necessary to stimulate the economy, Hoyer said. But in the longer term, Congress will have to rein in spending and raise taxes to tackle the debt, he added.
"Raising revenue is part of the deficit solution, too," Hoyer said.
Senate Republican Leader Mitch McConnell said, "It's now official. Top Democrats on Capitol Hill are starting to signal their intention to raise taxes on the middle class."
On the spending side, Hoyer said Congress should consider raising the retirement age for full Social Security and Medicare benefits, and making those benefits progressive so that wealthier recipients get less than the needy.