From Citizens for Tax Justice (http://www.ctj.org):
On Thursday, Senate offices received a letter (http://www.responsibletaxes.org/responsible-taxes-matter-now/) calling for the expiration of the Bush tax cuts for the rich from Americans for Responsible Taxes (http://www.responsibletaxes.org/), a coalition of non-profits, labor unions, faith-based groups and think-tanks. The letter was signed by 50 organizations including Citizens for Tax Justice.
President Obama pledged to allow the Bush income tax cuts to expire for the two percent of taxpayers who have adjusted gross income in excess of $250,000 ($200,000 for unmarried taxpayers). Democratic leaders in the Senate have indicated that they want to vote in September to extend the Bush income tax cuts for everyone else (the other 98 percent of taxpayers). Many Republican Senators are expected to oppose any bill to extend the income tax cuts for 98 percent of taxpayers because they will demand that they be extended for the richest two percent as well.
A few Senate Democrats have indicated that they would support extending the income tax cuts even for the rich for some period of time, but it is unclear whether they would go so far as to vote against any bill that extends the tax cuts for “only” 98 percent of taxpayers. Because of the bizarre Senate practice of requiring 60 votes to enact any legislation, it is conceivable that the Republicans would be able to block an extension of the income tax cuts for 98 percent of taxpayers over their opposition to allowing tax cuts to expire for the richest two percent.
The letter from Americans for Responsible Taxes points out that public opinion (http://www.cbsnews.com/8301-503983_162-4923732-503983.html and http://pewresearch.org/pubs/1677/obama-economic-policies-better-than-bush-divide-over-tax-cut-expiration) and the opinion of economists and analysts at the Congressional Budget Office (CBO) and elsewhere are firmly in favor of allowing the tax cuts for the rich to expire. CBO analyzed several policy options to create jobs and found that income tax cuts generally would be the least effective (http://www.cbo.gov/ftpdocs/108xx/doc10803/01-14-Employment.pdf), and that income tax cuts for the rich would be particularly ineffective.
Technically, the approach being discussed by President Obama and the Democrats would extend the reductions in income tax rates for all but the top two income tax brackets. Those top two brackets would be adjusted so that no one with AGI below $250,000 ($200,000 for unmarried taxpayers) would fall within them. Limits on personal exemptions and itemized deductions would also come back into effect for taxpayers above the $200,000/$250,000 threshold.
The letter also points out that even the richest two percent of taxpayers (those who would be affected by the top two income tax rates) would benefit from the extended rate reductions in the lower brackets, so even the richest two percent would not entirely lose their income tax cuts.
The main Republican talking point to justify extending the income tax cuts for the richest two percent appears to be that any other approach will harm small businesses. However, reports from Citizens for Tax Justice (http://ctj.org/pdf/smallbiz2010.pdf), the Center on Budget and Policy Priorities (http://www.cbpp.org/cms/index.cfm?fa=view&id=3251), and the CBO analysis mentioned above, all explain why income tax cuts for the rich would not help small businesses to expand and create jobs.