CQ TODAY ONLINE NEWS
June 3, 2011 – 10:54 p.m.
Rep. Levin Suggests GOP, Democratic Tax Plans Face Push-Back From the Left
By Sam Goldfarb, CQ Staff
Recent comments from the top Democratic tax writer in the House raised doubts about the prospects for a tax code overhaul this year and revealed a debate within his party over how to raise revenue while preserving popular breaks.
Both parties have been talking taxes recently, but for very different reasons: House Republicans are contemplating a rewrite of the code to ease the tax burden for corporations and individuals; Democrats are pushing to include additional revenues in an agreement for raising the debt ceiling by August, a move that Republicans strongly oppose.
Within that context, Ways and Means ranking member
Levin’s concerns are likely to be echoed by liberals in the Senate and point up the difficulty either side will have in finding a path to making major tax changes.
On the one hand, Levin joined a chorus of lawmakers, economists and pundits in saying that there is “a real need” to improve the U.S. tax system.
But his vision for change was modest by most standards, and he sharply criticized a proposal from Ways and Means Chairman
Levin suggested that such a proposal, if fleshed out, would run afoul with liberals who view many tax preferences as important tools for conducting social and economic policy.
“The approach advocated by House Republicans has been to simply announce that tax reform should achieve a top rate of 25 percent for both individuals and corporations, with no discussion whatsoever of what we would need to change and give up to achieve those rates,” Levin said in a June 3 speech to the Center for American Progress Action Fund. “This is the equivalent, as I once put it, of putting a blindfold on, spinning around three times and picking a number.”
While acknowledging that it remains in an outline form, Levin argued that the GOP plan would have severe consequences for poor and middle-income families. The proposal, he said, would mean removing or sharply curtailing tax breaks such as the earned income tax credit, the mortgage interest deduction and the exclusion for employer-provided health insurance — policies that “have helped to build a strong middle class.”
Looking for Revenues
Though most Democrats would be expected to support the earned income tax credit, a program that helps low-income taxpayers, Levin’s vigorous defense of several other tax preferences was perhaps more noteworthy and could signal trouble for any effort to bolster the government’s coffers.
Without curtailing large tax expenditures such as the mortgage interest deduction and the employer-provided health exclusion that benefits middle- and upper-income taxpayers, it could be hard to move forward with a tax rewrite that significantly lowers overall tax rates but is “revenue neutral,” as Republicans would like.
As Democrats demand that new revenue be included in a debt limit deal, leaving those tax breaks untouched would also remove an option for raising funds that has been put forward by several bipartisan fiscal commissions.
Rep. Levin Suggests GOP, Democratic Tax Plans Face Push-Back From the Left
Levin’s viewpoint is not necessarily shared by all Democrats. House Minority Whip
Debt Limit Debate
In recent days, Republicans have said in the strongest terms that they will not accept any increase in marginal tax rates as part of a debt limit agreement or under any other circumstances.
That point was made repeatedly at a news conference June 3 featuring House GOP leaders.
Referring to the debt limit negotiations, Speaker
Still, Boehner and Majority Leader
Levin said that he would be happy to revisit the George W. Bush-era tax cuts (PL 107-16, PL 108-22), which Congress recently extended through the end of 2012, during the debt limit negotiations. But he, added, “when Republicans say it’s not on the table, it’s hard to discuss something that’s not on the table.”
Levin Eyes Modest Changes
Levin, while not keen on making radical changes, said there are still plenty of reasons to re-examine the tax system, such as overlapping education and savings incentives and disruptions caused by the alternative minimum tax and regularly expiring tax breaks known as “extenders.”
He also said he was open to lowering the corporate tax rate, if not to Camp’s 25 percent, and suggested that it would be possible to improve the current system of taxing overseas business profits.
Still, Levin seemed to suggest that fundamental changes to the tax code are not imminent. He predicted that Congress would once again fight over the Bush-era tax cuts. The outcome of that battle, he said, would depend on whether or not Obama is re-elected, as Republicans fight to maintain current tax rates and Democrats seek to roll back tax cuts for upper-income earners.
All Bush-era tax cuts were temporarily extended last December as part of a deal (PL 111-312) that also included a payroll tax holiday and the extension of federal unemployment benefits.