Are taxes really on the table? Republicans and the White House disagree
August 1st, 2011
11:14 AM ET

Are taxes really on the table? Republicans and the White House disagree

Perhaps not surprisingly, there's a disagreement between the White House and Republicans on the likelihood that the deficit reduction committee will tackle tax reform.

The politics of these positions should be fairly clear: ahead of these uncertain votes, Republicans want to reassure members that taxes aren't really on the table; Democrats want to reassure members they are.

What's behind the spin....

There's no disagreement on this point: the Committee can take up tax reform if it chooses to. The dispute is whether the deal is structured in a way that motivates the committee to do it. Keep in mind the Committee's product - if it passes Congress - would take effect January 2013, just when the Bush Tax Cuts expire.

First here's a summation of the Republican view: House Republican leadership aides are arguing the Committee is unlikely to tackle tax reform because the group's goal is deficit reduction.

The Congressional Budget Office will score the Committee's deficit reduction package based on 2013 spending levels, when Bush era tax cuts have already expired. ($3.5trillion more revenue over 10 years). That means they'll be working off a baseline with higher revenue. If the President wants to re-instate tax cuts for, say, the middle class, then that would count as revenue lost. A committee focused on deficit reduction doesn't want to be in the business of losing revenue. The committee would then need to find a way to offset that lost revenue - closing loopholes wouldn't be enough. They'd have to move to cuts.

Republicans argue Democrats on the committee are unlikely to want to grapple with that. Therefore Congress will have to deal with the expiration of the Bush tax cuts at some time, but there's no motivation to do it in the context of a deficit reduction committee.

The Administration's Pushback: the administration argues that the committee will be motivated to take up tax reform precisely because the Bush tax cuts will soon expire. One senior White House official says the schedule is motivating:

– First, the suggestion that it is impossible for the Joint Committee to raise tax revenue is simply false.

– If the Joint Committee decides as part of a balanced deal to eliminate tax subsidies for oil and gas companies or corporate jets, or if they decide to limit the value of itemized deductions for high income earners that the president has called for, these measures would raise revenue – completely independent of any baseline assumptions. They can absolutely be part of a balanced agreement, and the president will be encouraging the Joint Committee to consider them.

- Second, nothing in the legislation specifies that the Committee operate under any specific baseline. Any suggestion otherwise is false.

– Under the terms of the statute, the Joint Committee could decide to use whatever baseline they want. If they want to operate under the baseline used by the Fiscal Commission, that assumed the expiration of the Bush high income tax cuts, they are free to do so. Likewise, if they want to operate under a current policy baseline, which is what Speaker Boehner was relying on when he said he had agreed to $800 billion in revenue from tax reform, they are free to do so as well.

– The legislation is no obstacle to revenue raising tax reform. And the President will be making the case that this should be part of a balanced deal coming out of the Joint Committee.

– Could CBO use that baseline – it’s irrelevant to the question of whether the committee could raise revenue or not. It still could. And, for instance, tax reform that included closing loopholes (jet planes, oil/gas) would score as reductions from the baseline that the GOP is claiming is locked into law – but is not.


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soundoff (18 Responses)
  1. 4merRepubCT

    My guess is that the next battle will be over what 12 people will sit on this commission. It would be great if it were comprised of level headed, reasonable, rational compromisers with some history in Congress. My guess is that the Traitor Party will be screaming that it wants six economic terrorists as the Repub delegation, and we'll get another bloodbath.

    August 1, 2011 at 11:34 am |
  2. Rick McDaniel

    No, they really aren't.

    In truth, since only 45% of households are actually paying any taxes, it is obvious that the entire tax code needs to be revised, to stop the avoidance of income taxes. That is a major project, and major projects simply DON"T GET DONE!

    The limited revenue from stopping the tax cuts on the "rich", is not significant in the first place. Obama would spend that amount in a single day. That is nothing but "popular" propaganda, on the part of the Dems, to mislead the people and make them believe something that is simply hogwash. Of course, the people, are VERY gullible.

    August 1, 2011 at 12:31 pm |
    • Joe

      If the 'limited revenue' is insignificant, then why are the Republicans so vehiment in protecting it? The issues should be centered around JOBS ... good jobs. Where people actually can afford to live AND pay taxes. When corporations are outsourcing those better paying jobs to lower wage countries and then trying to 'force' the American workforce into the same wages ... there is little wonder why Americans living in this country cannot survive on 3rd world wages and look toward the government for help.

      My son just went through 4 years of college to become a teacher ... problem is the states are now laying teachers off in droves (thank you Wisconsin and Governor Scott Walker!!) and he cannot find work in his degreed profession. Another 'number' that won't hit the government statistics ... college grads who technically are not 'unemployed' because they can't find employment in the 1st place.

      The greed shown at the top levels in most organizations is amazing. American business is driving more and more toward poverty to line their pockets with record profits. These same companies can't understand why the 'normal' person isn't buying anymore. I have and used to be traditionally Republican in my thinking ... I have never been part of the laid off work force nor unemployed, but I do open my eyes and feel for those around me. I cannot believe what this once great country has resolved to become. The issue isn't the 'American Dream' .. but what is left for an American to 'dream'?

      August 1, 2011 at 1:38 pm |
    • Brandon Tripp

      We're not gullible, you're just bad at math. Apparently you also have no idea what Obama spends in a day or what is and is not his choice in spending. The income disparity in the US is now worse than a majority of banana republics. If anyone is gullible it would be the guy who is not in the top 1% of income earners who thinks that 10 year temporary tax cuts for billionaires is in some way beneficial for him so he proceeds to bend over as his quality of life declines and blames Obama.

      August 1, 2011 at 1:40 pm |
    • cindy

      Oh Rick, 'Your so intel on Propaganda???/ I bet your a rich little kid,and Classic Moron! What cult do you belong to sir, The Norquist Cult, I new it! LOLOL Not worth a response,sorry?

      August 1, 2011 at 2:14 pm |
    • jean2009

      I love this quote from SodaHead website.

      "I have never met so many idiots in my life until I started going to Tea Party rallies and talking to TP's in forums like this so you tell me- Is the Tea party full of idiots ?

      An idiot, dolt, or dullard is a mentally deficient person, or someone who acts in a self-defeating or significantly counterproductive way. More humorous synonyms of the term include addlehead, blockhead, bonehead, deadhead, dimwit, dodo, dope, dummy, dunderhead, nincompoop, ninny, nitwit, numbskull, stupidhead, thickhead, and twit, among many others. Archaically the word mome has also been used. The synonymous terms moron, imbecile, and cretin have all gained specialized meanings in modern times. An idiot is said to be idiotic, and to suffer from idiocy. A dunce is an idiot who is specifically incapable of learning. An idiot differs from a fool (who is unwise) and an ignoramus (who is uneducated), neither of which refer to someone with low intelligence.

      I have listened to The Tea Party make claims against Obama so preposterous they can only be called idiotic. "

      My answer is yes...In the teapotty you have a bunch of brainwashed fools that vote against their own best interests, and generally are clueless.

      It is the "rich" who are fighting that "insignificant tax" by using gullible teapottiers as their shield.

      August 1, 2011 at 2:21 pm |
    • Chas in Iowa

      If the Bush tax cuts were so insignificant how come the GOP was ready to default the country to protect them? Can't have it both ways, Rick.

      August 1, 2011 at 4:09 pm |
    • Jay in NC

      Rick, is correct. A large portion of the US homes do not pay federal income taxes. Jean and her friends have lost the argument so they revert to name calling.

      August 1, 2011 at 4:11 pm |
      • jean2009

        This is exactly the taxation without representation I was talking about earlier...no one passed a law, or signed a bill....but the increased cost for credit will cost everyone a value added tax.

        NEW YORK (CNNMoney) online today– The debt ceiling debacle has just cost U.S. taxpayers more than $1.7 billion.

        That's the amount of additional interest the government had to pay investors Monday to sell Treasury bills that finance its operation.

        To be precise, the extra cost is $1,721,250,000 more in interest payments than the government would have needed to pay investors just two weeks ago, when they were willing to accept far lower rates before the debt ceiling became a crisis.

        "That's real money," said IHS Chief Economist Nariman Behravesh. "Taxpayers need to wake up to the fact that these kind of shenanigans in the end cost."

        As Congress and the President have stumbled ever closer to the deadline for default - Tuesday according to the Treasury Department - interest rates on short-term government paper have jumped.

        On Monday, the U.S. Treasury auctioned $27 billion of three-month bills at an interest rate of 0.115% up from 0.02% two weeks ago. Treasury also auctioned $24 billion of six-month bills at a rate of 0.15%, an increase from 0.06% two weeks ago.
        0:00 / 1:25 Hey Congress: Economy needs help NOW

        "The uncertainty has driven up yields," said John Canavan, credit market analyst with Stone & McCarthy Research Associates. "You increase uncertainty in the markets and the markets will demand compensation for that."

        The cost of that uncertainty for the U.S. Treasury (and consequently U.S. taxpayers) will likely grow on Tuesday, when the government is scheduled to auction $23 billion in one-month Treasury bills.

        They're currently yielding 0.14%, up from 0.01% two weeks ago. If that increase holds it would cost taxpayers an additional $249 million in interest. "

        August 1, 2011 at 5:38 pm |
      • Jay in NC

        The key statement is "taxpayers an additional $249 million in interest. " That is taxpayers, and like Rick said about 1/2 of the homes in the US do not pay any Fed. Income Tax. We are talking about two different things. One, the number of people that pay tax, and 2) the actions that cause those people to pay more tax.

        August 1, 2011 at 5:46 pm |
      • jean2009

        Everyone files taxes...some owe no tax because they have more income tax credits than income...I can understand that for the less fortunate who earn so little they owe no tax....but others have huge write-offs, receive their billions as capital gains which are taxed at 15%, and are given subsidies.... so that they also pay much less tax....may I say "welfare for the rich".

        August 1, 2011 at 5:52 pm |
      • Jay in NC

        Jean, the news story you quoted does not tell the full truth. Back in March he yield was .16 %, in other words the rate has dropped during the past few months. This type of story gets non investors worked up, those that follow the market know that historically the rates have been lower, because of the debt talks. Who would you lend money to, the person that has their finances in order, or the guy that has to borrow money to repay you?

        Yes, billionaires may get their write offs but as you say they do pay taxes on the money. The truth remains that a lot of people do not pay any fed. income tax. Yes all workers have to file a return, but few have to pay. Why not just give President Bush credit for lowering everyones taxes, even yours, and move forward to solve the problems today.

        Your president just made a good deal for the Tea Party. Maybe they will vote him in next time.

        August 1, 2011 at 6:03 pm |
      • jean2009

        Treasuries for July 15, 2011 were yield 3-month treasuries 0.02%
        Treasuries for March 15, 2011 were yield 3-month treasuries 0.10%

        6 months for July 2011 were 0.05 and for March 0.14 http://www.docmagic/treasury-yield/2011

        Of course rates fluctuate depending on what is happening within the economy and around the world, but to me it says they are headed back up.

        Which means all kinds of credit will be more expensive for every household. Many experts believe interest rates will start to rise even if the debt ceiling is raised before the deadline. Government debt could be downgraded because this is making investors nervous. In that case, investors will want more interest for the risk of buying bonds...and that will mean increased costs for everyone regardless of whether next April a person owes or does not owe tax...and the money the government spends for interest is money that could be spent for something else...which you totally seem to want to overlook.

        Why your death wish for the United States?

        August 1, 2011 at 7:37 pm |
      • Jay in NC

        Go to the treasury.gov website. Many times it has been over the rate trading for today. This is a non issue. Back in March you were not paying more for interest, you will not this month.

        http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=billRatesYear&year=2011

        Treasury lending is not tied to bank lending. The Federal Reserve sets the rate that it charges banks to borrow money. The Fed Funds Rate is the primary way Fed control interest rates around the country. It has been holding steady at .25 for over a year. They have not announced any plans to raise the rate. This is independent from the bond market. The only reason it will go up is if your President decides to raise that cost. It is not market driven. Saying that your interest rates will go up is just scare tactics by people that do not understand banking, and the markets.

        I want the best for my country. Currently every man woman and child is in debt over $56,000 each. Think of it, a family of 4 is in debt $224,000, with nothing real to show for it. Some how, some way this money has to be repaid. Remember you saying the same thing, that it is money spent, money we owe and have to pay our bills. I agree, we have to pay this debt. Looks like you would agree that the excessive debt has to end, this is bad for the country, bad for the poor.

        Yes, I agree, President Bush should not have borrowed the money, should not have started the wars. Check my post, I have always said that. However the same is true for your President. He should not be in the wars, should not be spending, borrowing the money.

        Consider this, tonight they agreed to put us in debt by over $2.2 trillion. That is $7,200 each person. That family of 4, is now over $28,000 more in debt. What did they get for that money?

        August 1, 2011 at 8:42 pm |
  3. betty eggerling

    I am a seniior conservative Republican that agrees with cutting the deficit and balancing the budget. For the sake of our country, I hope the Tea Party and the representatives in the House and Congress can hold the line on these two things in the future. CNN has enabled me to listen to the problems of seniors, jobless persons, veterans and others, but I have yet to hear from millionnaires that take hugh bonuses from our companies, oil executiives that are earning billions on the backs of taxpayers, and especially bank executives that were involved in the big housing crises mess. Let's hear from them on CNN. I would like to have them explain to me why the elected Republicans will not tax them individually as a big part of the deficite reduction. Let's hear what these executives have done to date to help create jobs, and definite plans for use of all that money in the future. The Americam people out here are not stupid.

    August 1, 2011 at 1:37 pm |
  4. jean2009

    Guaranteed Health Care In Iraq – But Not For You
    by Joseph E. Bowker, CMSgt, USAF (Ret) Posted January 06, 2011
    Related Topics: Health Care, Constitution, Democracy, Children

    You'd better sit down, folks.

    Article 31 of the Iraqi Constitution, drafted by your right-wing Bushies in 2005 and ratified by the Iraqi people, includes state-guaranteed (single payer) healthcare for life for every Iraqi citizen.

    Article 31 reads:

    "First: Every citizen has the right to health care. The State shall maintain public health and provide the means of prevention and treatment by building different types of hospitals and health institutions.

    Second: Individuals and entities have the right to build hospitals, clinics,or private health care centers under the supervision of the State, and this shall be regulated by law."

    There are other health care guarantees, including special provisions for children, the elderly, and the handicapped elsewhere in the 43-page document.

    Under force of arms, President Bush imposed his particular idea of democracy on a people not asking for it – perhaps a noble undertaking in one context and a criminal violation of international law in another.
    Bush's followers are proud of the Iraqi Constitution, a model for the world, they told us.

    So, according to the American political right-wing, government-guaranteed health care is good for Iraqis, but not good for us. Not good for you.

    They decry even a limited public option for you, but gleefully imposed upon the Iraqis what they label here as "socialism," with much Democratic Party member support."

    ....and whose taxpayers do you think will be paying for that through foreign aid for years to come?

    And who do you think profited from the most from the Iraqi War, the same corporation that don't want to help fund this country through taxes.

    August 1, 2011 at 6:04 pm |
  5. Barbara Stone

    I think it is time for Richie Rich to pay up. Multimillionaires should remember that their freedom to become rich is because our soldiers protect them. Most soldiers are not rich but they put their life on the line to protect us. If Richie lived in a
    third world country what would his life be. Get real.

    August 2, 2011 at 6:40 am |
  6. Zoe Benitez

    Hah, Italy protesters rally against Berlusconi

    December 13, 2011 at 5:23 pm |