GOP Leaders May Be Pondering Surrender On Taxes

Republicans are working to quiet rumblings that, if all else fails, they may give in on the high income Bush tax cuts. But a newly reported “doomsday plan” to do just that may be the GOP’s best way out of a bad situation: give a little, keep a lot, avoid blame for the fiscal cliff, and enter 2013 with the upper hand over President Obama.

ABC’s Jonathan Karl heard from two senior Republican lawmakers that the most likely fallback plan is for House leadership to bring up the middle income Bush tax cuts for a vote later this month. A leadership aide told Karl the plan is under consideration but that no decisions have been made.

Here’s how it would work.The bill would come to the floor, and Republicans would vote ‘present’ to register their disapproval with letting the top marginal rates go up, allowing Democratic votes to carry it to passage. Having already cleared the Senate, the bill would be sent to the White House and signed into law. Over and done, middle class tax increases averted.

Two House GOP leadership aides deny the ABC report: one called it “stupid” and said nothing of the sort had been discussed. Another told TPM that he hasn’t heard it being discussed and that Republicans remain committed to “prevent crippling tax rate hikes.”

But the plan may be Republicans’ easiest way out of a conundrum, reflected in Speaker John Boehner’s (R-OH) “Fox News Sunday” appearance. Obama has been unequivocal about the fact that top marginal tax rates must return to Clinton-era levels, and his position is popular.

If all of the Bush tax cuts expire, even temporarily, the public will blame Republicans, and Obama’s negotiating position will be strengthened. He can introduce a tax plan that accomplishes all of his revenue goals, and it will constitute a major tax cut. Bad news for the GOP — hence the incentive to cave now.

The doomsday plan will create headaches for elected Republicans, who are facing pressure from conservative anti-tax activists to hold the line. They may also have to answer for voting present in the months and years ahead, much as the GOP made issue of Obama’s voting record in the Illinois legislature in 2008.

But the last-ditch option has other important advantages for Republicans. Come 2013, Obama will need to raise the debt limit and pursue other goals such as raising $600 billion in further revenues by limiting tax deductions for people with high incomes, extending unemployment benefits, averting a pay cut for physicians who treat Medicare patients, and avoiding indiscriminate federal spending cuts.

Right now, the expiring Bush tax cuts constitute his critical leverage. Take that away and suddenly Republicans are in control, better positioned to press their policy demands vis-a-vis taxes and entitlement spending.

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