CQ TODAY ONLINE NEWS
Nov. 8, 2011 – 11:04 p.m.
GOP Shifts Strategy in Deficit Effort
By Joseph J. Schatz, CQ Staff
By floating a tax overhaul plan that would raise more than $300 billion in new revenue, Republicans on the joint deficit reduction committee have tried to seize the mantle of compromise after resisting tax increases for weeks.
But with many lawmakers in both parties wary of handing the other side a victory heading into the 2012 election, it remains far from clear whether the GOP proposal will produce momentum for a budget-cutting package that includes both entitlements and the tax code.
That much was evident as Democrats questioned both the substance and the math behind the latest proposal — which aides say would raise $250 billion in new revenue from the individual tax code — and argued that it falls well short of what is needed to reach a deal.
“I would not characterize it as substantial yet. But it’s a change,” said Sen.
Whether designed as a serious offer or a political ploy to shield Republicans from blame if the committee cannot reach a deal, as argued by some Democrats, the proposal appears to reflect newfound flexibility.
The plan is part of a broader bid by Republicans to meet the panel’s $1.2 trillion deficit reduction target by trading a tax overhaul that would raise revenue — in which lawmakers would eliminate some tax benefits to broaden the base of taxable income, while also reducing rates — in return for cuts to Medicare and Medicaid.
Democrats on the panel last month proposed a $3 trillion budget-cutting plan that included $1.3 trillion in tax increases. Republicans countered with a $2.2 trillion plan with $640 billion in revenue, little of which would be scored as tax increases by the Joint Committee on Taxation.
One source said the new GOP proposal, promoted in part by Sen.
It remained unclear, as Republicans talked among themselves and with Democrats, whether their proposal would have the deficit committee negotiate the terms of a tax overhaul or hand that task over to the standing committees with jurisdiction over tax policy.
Toomey, a former president of the conservative Club for Growth, is viewed as possessing more anti-tax bona fides than many others in his caucus.
Republicans also say a tax overhaul would raise about $100 billion more in revenue by growing the economy, although the Joint Tax Committee does not count such revenue in its official scorekeeping estimates.
A Victory for Democrats?
A GOP offer with a significant amount of real, quantifiable tax revenue would be a seeming victory for Democrats, who have long insisted that any deficit reduction deal include a “balanced” mix of spending cuts and revenue increases, with the wealthiest Americans footing some of the bill.
GOP Shifts Strategy in Deficit Effort
And it might not be an easy sell for conservatives who balked at “grand bargain” attempts earlier this year.
Yet from a political standpoint, it also may put some Democrats in an unexpected — and politically awkward — position of acknowledging GOP flexibility after weeks of accusing the party of kowtowing to anti-tax advocates. Just days ago, Sen.
So, after weeks of GOP intransigence on the question of taxes, Democrats are greeting the GOP proposal with caution and skepticism. They have not forgotten the unsuccessful effort in the summer by House Speaker
Democratic aides blasted the new GOP plan, in part because sources said it would cut the top individual income tax rate to 28 percent in 2013. The top rate is currently 35 percent, and is set to revert to the pre-2001 level of 39.6 percent in 2013, when the Bush-era tax cuts would expire. Allowing the 2001 and 2003 tax cuts expire for families making more than $250,000, as many Democrats prefer, would raise about $800 billion.
Moreover, a senior Democratic aide called the GOP plan “not serious,” questioning whether its individual tax provisions would actually produce $250 billion in new revenue.
“We’ve been very clear that there has to be some additional tax revenue. It has to be able to be scored by CBO,” Kerry said. “It has to be measured. That requires a certain kind of revenue. And we’ve been very clear from Day 1.”
Still, one GOP aide strongly rejected the idea that Democrats on the joint committee had simply dismissed the latest Republican offer. The aide said bipartisan groups of lawmakers were continuing to spend long hours picking through its details.
For their part, Democrats offered a new proposal on Monday night, according to one senior Democratic aide. That plan, the details of which were not clear, would cut spending by about $1 trillion and also increase revenue by about $1 trillion.
Adding Up the Revenue
The question of revenue has been at the heart of the joint committee’s gridlock over the past week. Democrats argue that revenue should make up a large proportion of any final deal, and they note that Obama’s debt commission last year proposed a far-reaching deal with 69 percent of its savings from spending cuts and 31 percent from revenue.
The priority for Democrats is taxes — not non-tax receipts such as Medicare user fees and proceeds from government spectrum sales, which accounted for much of the $640 billion in revenue in the GOP’s earlier, $2.2 trillion deficit reduction offer in October.
The GOP’s new proposal includes $700 billion in spending cuts and $500 billion in revenue. Provisions include raising money through the sale of public lands and increasing premiums for the military’s Tricare health care network, according to a Democratic aide. Yet the majority of the revenue in the latest GOP proposal appears to come from taxes.
Many Republicans, meanwhile, have been walking their own fine semantic line in recent months. Many have signaled a willingness to broaden the tax base by repealing or restricting tax deductions and credits in return for lower tax rates. Some have indicated a willingness to use some of the resulting revenue to reduce the deficit, producing a “net tax increase” that might violate the anti-tax pledge many Republican lawmakers ascribe to.
GOP Shifts Strategy in Deficit Effort
Others have fudged budgetary distinctions, suggesting that they would only accept revenue generated by economic growth.
With the joint committee’s Nov. 23 deadline to meet their deficit reduction target, coming days may force both sides to determine whether it is in their interests to accept a deal — or perhaps fall back to a smaller package of budget cuts that might be just as difficult to negotiate.
Sam Goldfarb, Paul Krawzak and Alan K. Ota contributed to this story.