'Many Republicans are starting to realize something important: On Jan. 1, if we haven’t gotten to a deal, Grover Norquist and his pledge are no longer relevant to this conversation.'

From The New York Times:

Senate Democrats — holding firm against extending tax cuts for the rich — are proposing a novel way to circumvent the Republican pledge not to vote for any tax increase: Allow all the tax cuts to expire Jan. 1, then vote on a tax cut for the middle class shortly thereafter.

The proposal illustrates the lengths lawmakers are going to in an effort to include new federal revenues in a fix for the “fiscal cliff,” the reckoning in January that would come when all Bush-era tax cuts expire and automatic spending cuts to military and domestic programs kick in.
      

Virtually every Republican in Congress has taken the pledge, pushed by Grover Norquist’s Americans for Tax Reform, never to vote for a tax increase — a pledge both parties see as a serious impediment to a tax compromise. But if tax rates snap back to the levels of the Clinton presidency on Jan. 1, any legislation to reinstate some of those tax cuts — but not all of them — would be considered a tax cut.

      

“Many Republicans are starting to realize something important: On Jan. 1, if we haven’t gotten to a deal, Grover Norquist and his pledge are no longer relevant to this conversation,” Senator Patty Murray, Democrat of Washington, said this week in a speech at the Brookings Institution. “We will have a new fiscal and political reality.”

President Obama has proposed allowing tax cuts to lapse on incomes over $250,000, raising the top two income tax brackets, allowing capital gains tax rates for affluent families to rise slightly and letting dividend income be taxed as ordinary income, as it was before 2003. Of the $5 trillion in tax increases that will ensue over 10 years if nothing is done, Mr. Obama’s plan would stave off all but $849 billion.

      

That tax increase on the rich would amount to 0.38 percent of the economy, considerably smaller than the tax increase secured by President Bill Clinton in 1993, which equaled 0.63 percent of the economy, according to White House calculations.

Next week, Senate Democrats will push tax legislation that makes a significant concession to Republicans. It would secure Mr. Obama’s tax increases on the rich, but it would tax dividends and capital gains at a 20 percent rate for households that earn more than $250,000. The White House this year proposed allowing dividends to be taxed again at ordinary income rates, a plan that would increase tax rates on dividends to as high as 44.7 percent, from 15 percent, according to a new report by the accounting firm Ernst & Young.