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Obama Solidifies GOP’s Tax Doubts

It might have been a long shot anyway, but Monday’s forceful deficit reduction speech by President Barack Obama — including a veto threat — is contributing to pessimism among Republicans about the Joint Committee on Deficit Reduction’s ability to address tax reform.

Obama is “undermining the work” of the panel, Co-Chairman Jeb Hensarling (R-Texas) said.

Speaker John Boehner (R-Ohio) said the speech was “not leadership. … The president has not made a serious contribution to” the panel’s work.

Republicans say the speech bolsters the arguments of top Republicans that negotiating a tax reform deal with Obama is fraught with peril.

Hours after Boehner urged the deficit panel to “lay the groundwork” for tax reform in a speech at the Economic Club of Washington on Thursday, House Majority Leader Eric Cantor went the other way. In remarks to Politico, the Virginia Republican said that while “all of us would like to see tax reform,” he thought the gulf was too wide between the parties to accomplish it.

And Obama’s speech has polarized the issue even further, Republicans say.

The speech “means tax reform is officially off the table until after the 2012 elections,” said Grover Norquist, president of Americans for Tax Reform.

“If the super committee is considering fundamental tax reform in its short lifetime, I’m sure the president’s proposal has already been shelved given its blatant political purpose,” said Rep. Kevin Brady (R-Texas), a senior House Ways and Means Committee member.

A senior GOP aide explained that Republicans are for tax reform, just not the kind Obama would agree to.

“I think everyone on our side would like to see it, as long as it’s good. Otherwise, many folks, including leadership and Chairman Camp, feel that it’s better to do no tax reform than to do bad tax reform,” the source said.

A spokeswoman for Ways and Means Chairman Dave Camp, a super committee member, said the Michigan Republican was “in complete agreement with the Speaker and the leader about the need for comprehensive tax reform that creates a climate for job creation.”

Some Republicans are also voicing concern about the political fallout if they walk away from tax reform efforts.

“It makes sense to stake a claim on tax reform rather than let Obama own the issue,” a second GOP House aide said.

The political reasons for publicly backing tax reform help explain why the issue has maintained currency despite the odds it faces to make it onto the deficit panel’s docket.

Ken Kies, managing director at Federal Policy Group, noted the 1986 tax reform bill took nearly three years to shape.

“There’s no way you can get it done” in the super committee, Kies said.

In his speech last week, Boehner conceded, “It’s probably not realistic to think the joint committee could rewrite the tax code by Nov. 23.”

But he said the panel can “lay the groundwork” for tax reform.

Boehner spokesman Michael Steel said the panel “could agree on a framework — rules that would guide the process — that would pass the House and Senate as part of their deficit reduction package.”

When asked whether the panel had time for tax reform, Hensarling said last week: “I hope so. I don’t know so. Particularly, I would hope we could get some mindshare and consensus around business tax reform that I believe could be pro-growth and add revenues.”

And just after blasting Obama’s Monday speech, Hensarling professed “hope” that Obama would support tax reform spearheaded by the panel.

Obama on Monday called for a “balanced” approach to deficit reduction and vowed to veto legislation that changed entitlement programs without raising additional revenue.

“I will not support any plan that puts all the burden for closing our deficit on ordinary Americans. And I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share,” Obama said.

Perhaps the most divisive proposal from Obama is what he is dubbing the “Buffett Rule,” a reference to billionaire Warren Buffett, who has argued that the tax code should be changed to alter discrepancies in rates among the brackets.

The tax would act as a kind of alternative minimum tax for households making more than $1 million a year to pay the same tax rates that the middle brackets do.

Regardless of whether that becomes law, it could put the GOP in a bind, Democrats say, since polling shows support for increasing taxes on wealthy individuals as part of a deficit reduction plan.

“Republicans have put themselves in an untenable position of defending tax breaks for the wealthy from now until the end of the year,” a Democratic political operative said.

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