Nevada’s House Dems join foes of tax hike on the wealthy

By Lisa Mascaro

Monday, March 23, 2009 | 2 a.m.

On one issue, most of Nevada’s lawmakers in Washington have come to unusual agreement.

Democratic Reps. Shelley Berkley and Dina Titus and Republican Sen. John Ensign all oppose President Barack Obama’s plan to limit certain tax deductions for high-income taxpayers as a way to raise money for universal health care.

Senate Majority Leader Harry Reid has concerns about the proposal but is withholding judgment at the moment, his office said.

Obama’s plan to reduce the tax deduction on mortgage interest, as well as charitable giving, has animated Washington. Even though the tax would be on the wealthy, defined as families making more than $250,000 annually, it faces widespread opposition. Some think it is a nonstarter. The unlikely bonding of Nevada’s lawmakers across the political aisle shows the steep climb Obama faces in trying to shift entrenched public policy.

Taxing the rich to provide health care for the poor sounded much easier on the campaign trail than it does in Henderson or Las Vegas, where the foreclosure rate is higher than anywhere else in the nation.

“For most of America, the deduction they get on their home is their biggest,” Berkley said. “No matter what income bracket you’re in, mortgage interest deduction is important, especially if you’re going to stimulate an industry that builds homes. I don’t think this is an appropriate time to be even considering it.”

Titus testified before the House Budget Committee that the housing market in her district is in tatters. Limiting the deduction “could lead to a further decline in home prices.”

As the recession continues and deficit spending mounts, even Obama’s faithful among the Democratic ranks are gently pushing back for moderation.

“It’s not just Nevada Democrats, it’s a lot of Democrats,” said Norman J. Ornstein, a congressional scholar at the American Enterprise Institute. A group of 15 fiscally moderate Senate Democrats formed an alliance last week to promote “a fiscally responsible spending plan” as its first order of business.

“You’ve just got this level of unease,” Ornstein said.

Obama’s $3.9 trillion budget is making its way through Congress, with votes expected the final week of March.

The budget does not carry the force of law but stands as a blueprint of priorities for the coming 2010 fiscal year. The dollars and policies it establishes will guide congressional spending for the year to come.

Obama’s budget begins to tackle his signature issues — $800 tax cuts for 95 percent of working families, a $2,500 college tuition tax credit, health care reform and a cap-and-trade system to create renewable energy and green jobs and reduce foreign oil dependency.

Lawmakers praise the transparency: For the first time, the budget includes the costs of the wars in Iraq and Afghanistan.

Yet even the president sees the rocky terrain ahead. Analysts are projecting greater deficit spending than initially imagined as the economy worsens. Although most economists agree government spending is necessary to propel the country out of the recession, growing deficits sound alarms in Washington.

As Obama gathered the leaders of the House and Senate budget committees to his side last week, he pressed for a “healthy debate.”

“We need more good ideas,” the president said. “So if there are members of Congress who object to specific policies and proposals in this budget, then I ask them to be ready and willing to propose constructive, alternative solutions.”

The proposal that caught the Nevadans’ attention would reduce the mortgage deduction from 35 percent to 28 percent on those making more than $250,000. It would do the same for charitable giving. Reducing those two deductions on the wealthy would raise $318 billion, a down payment on Obama’s proposal for universal health care.

The alternative, as noted in Obama’s budget and floated by some members of Congress, is to start taxing the health care benefits workers receive from their employers. It is a proposal Republican Sen. John McCain offered on the presidential campaign trail.

The Nevada Democrats’ concerns sounded strikingly identical to those coming from the Republican side of the aisle.

Ensign, chairman of the Republican party’s policy committee, said charities across Nevada are “concerned about this proposal.”

The decisions by Titus and Berkley to make their objections public is particularly noteworthy because they come from rank-and-file members of the president’s party in the House.

Berkley and Titus also joined dozens of members of Congress who objected to a provision in Obama’s budget that would allow Veterans Affairs to start billing vets’ private insurers’ service-related medical care. The Obama administration has since rescinded that proposal.

Dana Chasin, senior policy analyst at the fiscal group OMB Watch, said the pushback Obama encountered shows the difficulty he faces in making sharp shifts in long-standing federal policy.

“When you’ve got broad-based tax policy questions, you’re going to have alliances that are not necessarily partisan,” he said.

As deficit spending grows after the bailouts of Wall Street and the economic recovery package, Democrats face tough decisions over how far they are willing to go to join the president.

Berkley said the time has come “for the country to make hard decisions.”

Titus said as much as she supports the president’s big ticket items on health care, education and energy, moving the agenda in his direction is “going to take a little work.”