By Annie Lowrey

New York Times

WASHINGTON -- With time running out, members of the special congressional deficit committee are stymied by a deep rift over whether affluent Americans should help reduce the deficit by paying more taxes.

Republicans hold that the committee's plan should consist predominantly of spending cuts, not tax increases, even proposing to lower income tax rates for everyone, including the rich. Democrats argue that this is unfair, fearing tax cuts would require cutting even more from government programs that primarily aid the poor.

The dispute involves complex tax policy details and revenue projections. But at its core, the fight is over who should be shouldering the burden of deficit reduction in a time of stagnating median incomes and growing income inequality.

The politically charged notions of economic equality and fairness have come to define the congressional negotiations, which have gone on for weeks, and the year of deficit proposals, deficit talks and deficit commissions that came before them.

The growing disparity in income has become a major issue in the 2012 election season. Democrats are eager to move the debate away from the stagnating economy, and to cast Republicans as the protectors of the super-rich. For their part, Republicans are happy to accuse Democrats of "class warfare." But they, too, are showing sensitivity to the disparity. Mitt Romney, for instance, has centered his presidential economic platform on aiding the middle class.

Some well-known Republicans, though, like former Attorney General Edwin Meese III, are urging a conservative revolt against any member of Congress who strays from the no-tax line. "Conservatives have been down this 'Read My Lips' road before," Meese, who was a member of Reagan's Cabinet, said Friday, a reference to a no-tax-increase pledge, eventually broken, by former President George H.W. Bush. "Any increases in taxes will be a betrayal of the promises made during the 2010 campaign."

A former adviser to President Bill Clinton, Matt Bennett, said that lawmakers from both parties were under intense pressure to stand firm against compromise, but that Republicans were facing a particularly hard choice. "It has become almost theological in Republican politics that the line in the sand against any tax increase cannot be crossed," Bennett said.

In this heated partisan climate, the 12-person, bipartisan deficit committee is charged with creating a plan by Wednesday to reduce deficits by $1.5 trillion over 10 years. If the committee fails to agree on a plan, or if Congress fails to pass it next month, steep automatic cuts go into place for starting in 2013.

Bennett's group, Third Way, has been trying to counter the partisan pressure, arguing that the political consequences for such failure are great. In a letter last week to committee members, Third Way's president, Jon Cowan, warned against a deal that met the law's requirements, but did so with smoke and mirrors, allowing both parties to declare victory without seriously addressing the problem.

"An unserious deal would risk further entrenching the growing cynicism that is poisoning our political system," Cowan wrote.

A major plan advanced by Republicans comes from Sen. Patrick Toomey of Pennsylvania: $890 billion in spending cuts and $250 billion in revenue increases, according to aides. The spending cuts are deep and far reaching. The proposal, for instance, raises the Medicare eligibility age to 67 from 65 and uses a less-generous cost-of-living estimate to trim $160 billion from Social Security.

It also includes an income tax cut for households. A high-income family would not pay the current top marginal rate of 35 percent, or the Clinton-era rate of 39.6 percent, as suggested by the Obama administration. Its top marginal rate would be 28 percent. The lowest bracket would drop to 8 percent from 10 percent.

To make up lost income-tax revenue and to shrink the deficit, Republicans would curb $3.5 trillion dollars' worth of tax breaks, items like credits and exemptions for retirement savings, child care and dependents. (The plan does not specify which ones would be cut.)

Toomey defended his plan in the Republicans' weekly radio address Saturday, but he also stressed that "the best way to revive the American economy is to reform our broken tax code."

"We should seize this opportunity to throw out this unfair monstrosity and replace it with a system that will lower tax rates for every single American, simplify the code and get rid of the special-interest tax breaks and loopholes," he said.

The Republicans' deficit-reduction plan might wrench the country back toward the black. But it would do so on the backs of lower- and middle-income families, some economists say. The Center on Budget and Policy Priorities, for instance, estimated that a household earning more than $1 million per year would see a 4 percent increase in its after-tax income under the Toomey proposal. Meanwhile, because of the loss of deductions, some middle-class families could actually pay more in taxes.

The deficit committee's deliberations on the Toomey proposal come at a time of increasing inequality -- an economic phenomenon brought to broad public attention by the Occupy Wall Street movement and a yearlong debate on tax cuts for the rich.

A nonpartisan Congressional Budget Office report released in October found that from 1979 to 2007, incomes increased 275 percent for the top 1 percent of households, but just 18 percent for the bottom 20 percent. The top two income groups saw their share of after-tax income climb 10 percentage points. The bottom group saw its decline by two or three percentage points.

The tax burden on the rich -- at the heart of the committee's logjam -- has grown lighter, too. Research by the economists Emmanuel Saez, of UC Berkeley, and Thomas Piketty, of the Paris School of Economics in France, found that the top one-thousandth of earners paid approximately 53.7 percent of their income in federal taxes in 1980. By 2004, that rate had fallen to 33.7 percent. Analysts worry that a plan that reduces taxes on the rich and cuts social spending programs for lower-income people might strengthen these trends.