Democrats Don’t Fear ‘Fiscal Cliff’

by InvestorPlace Staff | July 18, 2012 5:35 pm

[1]One of the biggest debates and points of contention between Democrats and Republicans in Congress has been over what to do with the Bush-era tax cuts. Set to expire at the end of the year unless renewed, they’ve become an important sticking point between the two parties.

Republicans want the tax cuts to stay in place for all income brackets, while Democrats want to eliminate the tax cut for those making more than $250,000.  Attempts to find a compromise that would satisfy both parties have not born fruit.

Now, it seems that Democrats may not bother. On Monday, Sen. Patty Murray, D-Wash., signaled her party’s willingness to let all the tax cuts expire[2] unless the Republicans budged from their refusal to raise taxes on incomes above $250,000.

Going over the so-called fiscal cliff could have a negative impact on the U.S. economy[3], but Democrats appear willing to risk it. Why? Polls show most Americans support a tax increase[4] on the top end of the income bracket. In a poll by Pew Research Center, 44% of people said an increase on taxes for those making more than $250,000 would help the economy, while 22% said it would hurt it. Additionally, 41% of those surveyed said the tax increase would make the tax system “more fair”, while 21% said it would make the system “less fair.”

The trick for Democrats will be spinning this to place blame for any future tax increases on all Americans on Republicans. They also face an uphill battle in getting independent voters to realize their tax plan comes from Democrats and Barack Obama. Just 53% of independents knew Obama supported this plan, with the remainder of those polled either not remembering who supported the idea or mistakenly thinking Mitt Romney alone or both candidates supported the plan.

Of course in a perfect world, the parties would come to a compromise that would benefit the vast majority of citizens, but in this contentious election cycle, that seems to be less and less likely with each passing day.

— Benjamin Nanamaker, InvestorPlace Money & Politics Editor

The opinions contained in this column are solely those of the writer.

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