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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.

“There is more rate reduction in our policy proposals, in our plan, than there is elimination of tax expenditures. Period,” he said.

And Crapo said what extra revenue that comes in will be from economic growth spurred by lower rates and the simpler tax code that the gang of six envisions.

“Conservative assumptions cover this question of how the revenue will be obtained,” he said, and they “make the argument about a tax increase inaccurate.”

Gang of six member Sen. Saxby Chambliss (R-Ga.) said the analysis posted by Ryan’s staff on his website is “just wrong.”

“He’s using a baseline that is not the March baseline is all I can say. If this plan is scored by CBO today, it would be a $1.5 trillion tax cut. The facts are what the facts are,” Chambliss said.

But the Congressional Budget Office assumes the Bush-era tax cuts will expire on schedule in 2013.

And that could be the key. Extending the Bush tax rates for the next decade costs about $3.5 trillion. And many Republicans — including Ryan — assert that allowing tax cuts to expire should be treated as a tax increase.

But some powerful forces in the GOP have so far held their fire, including anti-tax advocate Grover Norquist.

Crapo said he hopes Norquist ultimately gets behind the plan.

“I’ve worked with Grover over the years and I’ve kept in touch with him. ... What we are talking about — broadening the base, moving more toward a flatter tax and dramatically reforming the tax code — is exactly the sort of thing that Americans for Tax Reform promotes,” Crapo said.

Some House Republicans, including Cantor, have stated concerns about the additional revenue assumed in the group’s plan. Republican Study Committee Chairman Jim Jordan (Ohio) labeled it a tax increase.

One senior Democratic aide pronounced the gang of six plan irrelevant to the race to increase the debt ceiling, with Senate Democratic and Republican leaders moving forward with a fallback plan instead and House Republicans still unable to get their Conference to back a compromise that touches revenue.

Even though White House spokesman Jay Carney suggested Wednesday that President Barack Obama might sign a short-term debt ceiling increase that would last a “few days” if both parties agreed to a larger deal, sources said the plan would not be ready, partly because the gang of six is still warring internally over a few key issues.

“This would have been a great proposal to announce in April, or a month ago,” the aide said. “The train has left the station.”

The group’s idea, however, could still play a role after the debt ceiling is increased.

Reid and Senate Minority Leader Mitch McConnell (R-Ky.) have crafted a fallback plan that pairs a debt limit increase with creation of a joint committee empowered to send a deficit reduction package to the House and Senate floors.

Senate Budget Chairman Kent Conrad (D-N.D.), a member of the gang of six, said Reid is “open to” letting the group’s plan come up for a vote regardless of what the joint panel devises.

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