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Tax Issues Could Derail ‘Gang of Six’

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“Gang of six” Sen. Mike Crapo defended the group's deficit reduction proposal Wednesday.

Updated: 8:55 p.m.

The debate over the “gang of six” deficit reduction plan, like the “grand bargain” before it, will likely come down to one word: taxes.

The $3.7 trillion bipartisan plan enjoyed a surge of support from both parties Tuesday, but the tax question that bedeviled earlier negotiations between Speaker John Boehner (R-Ohio) and President Barack Obama could also trip up the group’s plan.

Beyond the tax issue, the actual group members still haven’t ironed out all of the details, and there doesn’t appear to be time to get the complicated package done before the Aug. 2 debt deadline, or even within the White House’s window of a “few days” after that. So, in the meantime, Senate Majority Leader Harry Reid (D-Nev.) said he would file a procedural motion to begin work on the GOP’s controversial Cut, Cap and Balance legislation.

Obama met with House and Senate Democratic leaders Wednesday afternoon, followed by a separate meeting with Boehner and House Majority Leader Eric Cantor (R-Va.). Unlike previous sessions, however, all sides were tight-lipped afterward.

Republican gang of six members are selling the plan to their colleagues and the public as a $1.5 trillion tax cut, although critics say it looks like a tax increase of $2 trillion or more.

Whoever wins that battle will determine whether the plan stays viable, Republican Senators say. They debated the issue at length during a luncheon Wednesday, with several Senators saying they weren’t yet convinced one way or the other.

Sen. Chuck Grassley (R-Iowa) was one of those Members who hasn’t made up his mind.

“My sense is that whether it flies is going to be based on the proposition of whether it increases taxes. ... If this is going to bring in revenue beyond just economic growth, or the fact that you have a simpler tax code and it enhances economic activity, it’s not gonna fly,” he said.

House Budget Chairman Paul Ryan’s (R-Wis.) staff posted an analysis on his website, saying the plan appears to increase revenues by at least $2 trillion. Ryan, a tea party favorite, also criticized the deal in a statement. And the Heritage Foundation said the plan appears to rely on a big tax increase.

But Sen. Mike Crapo (R-Idaho), who helped craft the tentative deal, said the additional revenue brought in by the group’s plan comes not from raising taxes, but from economic growth.

“Obviously, once you make a proposal that puts everything on the table, the knives come out,” Crapo said, noting attacks from some conservative groups as well as liberal ones upset by spending cuts. But Crapo said analysis that calls the plan a tax increase is “just not true.”

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