Democrats Seek to Set Sharp Lines in Measuring GOP ‘Fiscal Cliff’ Proposals

Posted November 12, 2012 at 10:55pm

Democratic Sen. Charles Schumer drew a sharp line today in negotiations with Republicans on the looming “fiscal cliff” of tax and spending issues, saying any GOP proposals on revenue should be measured against the higher rates for wealthy Americans due to take effect in January.

It is “not mathematically possible” to target the tax credits and deductions Republican leaders have said could be part of a tax agreement without also raising taxes on people making less than $250,000, the New York Democrat said on NBC’s “Meet the Press.”


“The only way to do it, the only way mathematically I have seen to do it, is go to that 39.6 percent [tax] rate” rather than the current lower rate, Schumer said.

The higher rate for top income earners is one of many tax increases set kick in at the start of 2013, along with automatic, across-the-board spending cuts that together will send a shock wave through the economy and possibly send the country into another recession.

Amid a series of post-election statements last week aimed at setting positions ahead of negotiations, President Barack Obama invited Congressional leaders to the White House this Friday to begin the high-stakes talks that may reset the country’s fiscal policies for years to come.

In a series of appearances on TV talk shows today, Republicans and Democrats said they were optimistic they can reach a deal even though they look no closer on the details of an agreement.

“I think there is a deal. The yin and yang of this, there has to be revenue,” Sen. Bob Corker (R-Tenn.) said on “Fox News Sunday.” But, he said, “What you have tied to that is true entitlement reform.”

To Democrats, however, the central point is 2001 and 2003 tax cuts, which they say should expire for upper-income earners.

Obama said Friday that he wants Congress to immediately extend the tax cuts for all but the top earners, or 98 percent of those who pay income tax. Speaker John Boehner (R-Ohio) said he would support additional revenue by overhauling the tax code and limiting deductions.

“How that revenue is collected is critical,” Sen. Patty Murray (D-Wash.) said on ABC’s “This Week.” “If it’s just eliminating tax loopholes that affect middle-class families and they don’t have a mortgage deduction or a charitable deduction or we raise their co-pay on Medicare, all of that revenue falling on the middle class is not a fair and balanced way to get to a deal.”

Murray said the expiration of all the cuts Jan. 1 changes the political calculation. With rates returning to their old levels, Democrats could then push for a new middle-class tax cut, essentially daring Republicans to oppose a tax cut for the vast majority of the public.

“That might be the way to do it,” she said.

But Schumer and others say the higher rates also should figure into the calculations on revenue in the current negotiations, allowing lawmakers to use the “scoring” of revenue proposals to hit needed targets for deficit reduction.

“I’m all for doing tax reform,” Rep. Chris Van Hollen (Md.), the ranking Democrat on the Budget Committee, said on Fox News. “The issue is, from what starting point? And I think the Simpson-Bowles [deficit reduction commission] starting point, which assumes that revenue from 39 percent, is the right way to go.”

“If what Speaker Boehner was saying, he is truly willing to get what we consider Congressional Budget Office-scorable revenue, then we can begin to work with one another,” Van Hollen said. “The tone was good. I think the jury is still out on exactly what the substance of what he said is.”

Budget analysts will apply that scoring to numerous measures beyond basic tax rates that may come to the negotiating table, and Republicans are considering numerous proposals, from deductions and investment income to what Sen. Tom Coburn (R-Okla.) said is “waste” in federal spending.

“We’re at historic lows on revenues,” Coburn said on “Meet the Press.” “I agree we have to go there, but how we go there is very important in terms of incentives for capital investment in this country.”

Coburn suggested one area to get revenue would be by limiting total deductions and exemptions and by restricting those limitations to income beyond $250,000, the Democrats’ magic number for the middle class.

Other plans could allow rates for capital gains and dividend income to rise while keeping rates for ordinary income at current levels.

“I think there’s the basis for the deal,” Corker said. “Republicans are willing to put revenue on the table if we do it in a pro-growth way. The tragedy would be that we don’t go over the cliff because we kick the can down the road.”