Fiscal Cliff: 'Tax Rate Increase' or 'Revenue' May Prove Sticking Point
As members of Congress begin work on a plan to avoid the "fiscal cliff" and work toward a "grand bargain" on deficit reduction, one of the main disagreements between the political parties appears to be whether the plan will have tax rate increases or revenue increases. Republicans say they will accept increases in revenue by eliminating deductions and credits; Democrats are saying that tax rates must be increased on families making more than $250,000 per year.
On "Fox News Sunday," Rep. Tom Price (R-Ga.), chair of the Republican Policy Committee, which represents some of the more conservative House Republicans, said that he will accept some revenue increases as part of a compromise, but he would not agree to increases in the tax rates.
"As long as you close the loopholes, you limit the deductions, limit the credits, you can lower the rates and broaden the base, that's formula for a solution. And it's a real solution," Price said.
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On ABC's "This Week," though, Sen. Chuck Schumer (D-N.Y.) said that tax rates would have to be increased to get enough revenue for a $4 trillion deficit reduction package. Arguing that it is "mathematically impossible," Schumer said there is not enough revenue that could be raised by eliminating deductions and credits while also cutting rates such that middle-class families would not have to pay more.
Schumer seemed slightly more willing to compromise on the tax rates on Thursday. He suggested that the top tax rate might be kept at 35 percent, but said it would be "much harder to do."
Liberal New York Times columnist and Princeton economist Paul Krugman also insisted on tax rate increases in a Thursday op-ed. President Barack Obama should "go over the cliff," Krugman argued, if he does not get Republicans to go along with tax rate increases.
"Mr. Obama should hang tough, declaring himself willing, if necessary, to hold his ground even at the cost of letting his opponents inflict damage on a still-shaky economy. And this is definitely no time to negotiate a 'grand bargain' on the budget that snatches defeat from the jaws of victory," Krugman wrote.
Liberal Washington Post columnist E.J. Dionne made a similar argument in a Sunday op-ed.
"If Republican leaders in Congress want to pretend that Obama's re-election means absolutely nothing, the president seems willing to let all the Bush tax cuts expire," Dionne wrote.
The bargain that appears to be forming is similar to the one that was negotiated between Obama and Speaker of the House John Boehner in July 2011. Boehner agreed to revenue increases through eliminating deductions and credits and Obama agreed to reforming entitlements. The "grand bargain" was nearly done, but collapsed after Obama went back to the bargaining table and asked for more revenue.
