WASHINGTON -- President Barack Obama will be trying to stir up a fight over taxes when he campaigns Tuesday in Iowa, the state which traditionally kicks off primary voting and that launched him toward the White House four years ago.
Obama outlined the battle he wants to have with Republican challenger Mitt Romney in an address from the executive mansion on Monday, where he called for extending tax relief for the middle class but ending cuts for high-income earners, those taking home more than $250,000 a year.
Obama's sudden return to a focus on taxes coincided with the latest round of grim news for his re-election effort: Hiring has stalled and for the second consecutive month, Romney raised more campaign funds than the president, whose campaign acknowledged it could be in trouble in the November election.
At issue, and not for the first time in Obama's term, are tax cuts signed into law during the administration of former President George W. Bush. Those reductions in the federal assessment on income for all levels of earnings already have been extended temporarily but expire at the end of the year.
Obama contends ending the middle class cuts now, when the economy remains fragile, would be bad economic policy that would carve out higher tax payments from 98 per cent of Americans.
But he claims, as a matter of tax fairness, that Americans earning higher incomes should be paying more in this difficult economic period.
Romney and the Republicans insist that the tax cuts should remain in effect for all income levels. They argue that increased taxes on upper incomes would decrease the incentives among small businesses to add jobs. That's a major campaign issue with the unemployment rate stuck at 8.2 per cent.
Another problem Obama faces is a fund raising shortfall.
Obama's campaign and the Democratic party raised $71 million in June, well below the $106 million hauled in by Romney and the Republican party during the same period.
Obama's campaign said in an email to supporters that June was their best fundraising month of the campaign. But they told supporters, "We still got beat. Handily."
Romney was holding fundraisers in Colorado and planned to discuss energy policy Tuesday in Grand Junction, Colorado, an oil town in the western part of the state. The former Massachusetts governor held a closed-door fundraiser Monday night in Aspen, where between 300 and 400 guests gave about $2.4 million, according to the campaign.
Guests in Ferraris, Bentleys and Porsches drove down a private gravel road past a horse ranch to a sprawling stone private home. Romney's staff set up speakers blaring music outside of the tent set up in the backyard, noise that prevented reporters on the public sidewalk outside from hearing any of Romney's remarks.
The White House raised the tax issue with full knowledge that the Republican-controlled House of Representatives will not accept such a move unless it also includes extending tax cuts for high-income earners.
That is a symptom of the legislative and political gridlock consuming Washington in advance of the November elections. Another example is the plan in the House of Representatives to vote to remove Obama's health care overhaul from the books. That will be blocked by the Democratic-controlled Senate and would be vetoed by Obama even should it pass both houses in Congress.
Obama threatened to veto a full extension of the Bush tax cuts, saying in an interview with a New Orleans television station Monday that a tax cut for the wealthiest 2 per cent of Americans would cost $1 trillion over the next decade at a time when the nation needs to reduce the federal deficit.
Emphasizing the consequences to families, Obama was meeting Tuesday with an Iowa couple that the White House said would benefit from his tax plan. He was then holding a campaign event at a Cedar Rapids community college where he planned to make the case for the extension for those earning $250,000 or less.
Obama was making another visit to a battleground state with a more positive economic outlook than other parts of the U.S. Iowa's strong farm economy has pushed the state's unemployment rate down to 5.1 per cent, well below the national average of 8.2 per cent. Obama took a bus tour through parts of Ohio and Pennsylvania last week -- both states have more positive jobless rates than the rest of the nation -- and was campaigning in Virginia on Friday and Saturday. Virginia's unemployment rate is 5.5 per cent.
Yet polls in Iowa have shown Obama locked in a tight race with Romney, a potential warning sign after Obama triumphed in Iowa's leadoff caucuses in 2008 and then captured the state in the general election. Obama is vulnerable with many voters expressing wariness about his handling of the economy, his plans to reduce the federal debt and his ability to cure Washington gridlock.
