Bloomberg News

Boehner Asks Debt Panel to Take on Tax Breaks, Reject Hike

September 15, 2011

(Updates 15th paragraph with plans for next supercommittee meeting.)

Sept. 15 (Bloomberg) -- House Speaker John Boehner called on the congressional debt-reduction supercommittee to lay the foundation for a tax-code overhaul that would reject rate increases and curb some tax breaks.

In a speech to the Economic Club of Washington today, the Ohio Republican said the 12-member panel should recommend $1.5 trillion in budget savings by focusing solely on cuts to federal spending and overhauling Social Security, Medicare and Medicaid. The panel should fashion “principles” for a later, broad rewrite of the tax code that include lowering tax rates for individuals and companies, he said.

“Tax reform should deal with the whole tax code, both the personal side and the corporate side, and it should result in a code that is simpler and fairer to everyone,” Boehner said. “Tax increases, I think, are off the table, and I don’t think they’re a viable option for the joint committee.”

Boehner said the House will consider President Barack Obama’s $447 billion jobs plan, which includes cuts in payroll taxes, provides tax breaks for hiring by small businesses, and more spending for infrastructure. The speaker made clear he opposes much of it, calling instead for Republican ideas to boost job growth, such as reduced government regulation.

“The president’s proposals are a poor substitute for the pro-growth policies that are needed to remove barriers to job creation in America, the policies that are needed to put America back to work,” Boehner said. He called on Obama to direct his cabinet secretaries to temporarily halt all work “that gets in the way of private-sector job creation.”

Obama’s Proposals

The president is scheduled to offer his proposals to the supercommittee on Sept. 19. Obama’s aides said today that Social Security won’t be part of the administration’s deficit-reduction plan.

Obama “does not believe that Social Security is a driver of our near and medium term deficits,” said Amy Brundage, a White House spokeswoman.

An effort by Boehner and Obama to tackle entitlements in a broad debt-reduction accord collapsed this summer. Still, the Republican speaker said today he favors the supercommittee addressing long-term changes to the programs.

Changes to entitlement programs should be “phased in over time,” Boehner said, adding that “modest changes in spending programs today can have large effects tomorrow.”

Budget ‘Gimmicks’

At the same time, he rejected budget “gimmicks,” including factoring expected reductions in war spending into the panel’s recommendations.

On taxes, House Budget Committee Chairman Paul Ryan said today that a corporate tax overhaul is the one pursuit that Republicans and Democrats should be able to agree on.

This means lowering the overall corporate tax rate while eliminating tax exemptions that have been granted for specific businesses, the Wisconsin Republican said on MSNBC’s “Morning Joe” program.

This sort of tax overhaul can spur job creation, Ryan said. While Congress should be able to agree on a corporate tax overhaul before the 2012 elections, Ryan said in the MSNBC interview, the two parties have too many differences over taxes for individuals to settle that as quickly.

House Democratic Leader Nancy Pelosi of California told reporters today, “Any tax reform must also reduce the deficit.” Otherwise, she said, all of the deficit reduction would have to be accomplished by cutting government spending. “That’s not fair,” she said.

Closed-Door Meeting

The 12-member supercommittee met this morning in its first formal closed-door session. Its next public meeting is scheduled for Sept. 22, when panel members will hear from Thomas Barthold, chief of staff of the nonpartisan Joint Committee on Taxation.

The bipartisan panel is seeking $1.5 trillion in cuts in areas including defense and Medicare by a Nov. 23 deadline. On taxes, the group is likely to consider setting targets for major changes to be considered over the next year, before income tax cuts first enacted under President George W. Bush are set to expire at the end of 2012.

House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, has been holding hearings on a tax overhaul and said he wants to keep major tax legislation out of the supercommittee’s proposal.

The panel today was urged to push for a far-bigger package of policy changes than it is assigned to reach. A bipartisan coalition of 36 senators issued recommendations to the supercommittee that include increasing its savings target to at least $3 trillion and folding in long-term entitlement and a tax overhaul.

‘Borrow Heavily’

“They’re going to have to borrow heavily from the work that’s already been done” by other debt-cutting groups, said Senator Kent Conrad, a North Dakota Democrat and chairman of the Budget Committee. The senators joined calls by other leaders, including Boehner, to shoot for a higher savings target.

Boehner is emphasizing his economic credentials with the business community. He spoke in May to Wall Street leaders at the Economic Club of New York, where he said congressional Republicans wouldn’t let the U.S. default on obligations to bondholders in the debate over raising the nation’s debt limit. He outlined the party’s demands for spending cuts and tougher budget rules to rein in deficits.

Infrastructure, Schools

Republican leaders in both chambers are sparring with Obama over his $447 billion jobs plan. Republicans say the package of tax and spending measures proposed Sept. 8 relies too heavily on ideas such as added spending on infrastructure and to modernize schools that were already used in 2009’s economic stimulus. They say the nation’s 9.1 percent unemployment rate is evidence the earlier measure didn’t work.

Republican leaders also oppose tax increases Obama proposed to help offset the costs, including higher taxes on investment income and on the oil and gas industries. Senate Minority Leader Mitch McConnell, a Kentucky Republican, today said even Democrats are criticizing Obama’s plan.

Job creation is a top issue for both parties as next year’s elections draw nearer. Obama is confronting skepticism from voters about his economic policies as public opinion polls show his approval ratings are dropping.

A majority of Americans don’t believe his jobs plan will help lower the unemployment rate, a Bloomberg National Poll conducted Sept. 9-12 shows. The poll found 62 percent disapprove of his handling of the economy. The president’s overall job- approval rating was 45 percent, the lowest since he was inaugurated in January 2009.

House Seat

This week, Republicans picked up a House seat in New York in a special election to replace Democratic Representative Anthony Weiner, who resigned his seat in disgrace in June. Republicans next year will try to keep control of the House.

To tout his plan, Obama has traveled to North Carolina, Ohio and Virginia, all election battleground states.

The central feature of Obama’s proposal is a cut in the payroll tax, which covers the first $106,800 in earnings and is split between employers and employees. Obama would reduce the portion paid by workers next year to 3.1 percent from 4.2 percent now. The rate already was cut two percentage points under a tax deal reached last year. That cut expires Dec. 31.

On the spending side, the package includes a $105 billion infrastructure proposal for school modernization, transportation projects and rehabilitation of vacant properties. The administration also seeks $35 billion in direct aid to state and local governments to stem layoffs of educators and emergency personnel.

Obama would pay for his proposal by raising taxes on top earners, generating about $400 billion over a decade by capping some deductions and exclusions, according to administration estimates. The plan would tax carried interest, or profits-based compensation, of private equity managers, real estate investors and venture capitalists as ordinary income, instead of more lightly taxed capital gains, and end special tax breaks for oil and gas companies.

--With assistance from Jonathan Salant and Hans Nichols in Washington. Editors: Laurie Asseo, Ann Hughey

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Heidi Przybyla in Washington at hprzybyla@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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