August 1st, 2011
11:14 AM ET
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.
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.