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Deficit Panel Faces Tax Fight

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House Budget Chairman Paul Ryan and other Republicans already face conflicts with Democrats over taxes in the new deficit deal.

Democrats and Republicans are already disagreeing about what they agreed to in the recently signed-into-law deal to raise the debt ceiling, and not surprisingly, taxes are at the heart of the dispute.

Though the members of a new Joint Committee on Deficit Reduction haven’t yet been named, House Republicans and the White House have battled over budget assumptions in a wonk-vs.-wonk showdown over whether the committee would be able to raise taxes.

Of course, the issue of taxes and whether to raise them to cover the current budget shortfalls has proved to be one of the insurmountable issues between the parties during the debt and deficit debate. It’s the reason Speaker John Boehner (R-Ohio) twice walked away from talks with President Barack Obama, the reason House Majority Leader Eric Cantor (R-Va.) bowed out of bipartisan negotiations led by Vice President Joseph Biden, and ultimately, it’s the reason tax revenues were not addressed in the debt limit deal signed last week by Obama.

Senate Majority Leader Harry Reid warned last week that the conflict could derail the committee’s work. “If there’s continual talk by Republicans in the House and the Senate that there will be no revenue, then there will be no bill,” the Nevada Democrat said in an interview with NPR.

The wonky part of the dispute centers on which ruler — known as the baseline in budget parlance — will be used to use to measure the savings identified by the new 12-person committee, which was created by the law and charged with finding by Nov. 23 at least $1.2 trillion in deficit reduction over 10 years.

The argument made by House Republicans — and expounded on by House Budget Chairman Paul Ryan (R-Wis.) in an Aug. 2 blog post — is that the new law instructs the committee to use the Congressional Budget Office’s current law baseline, which assumes the 2001 and 2003 tax cuts implemented under President George W. Bush expire as scheduled at the end of 2012.

Extending those tax cuts just for the middle class but not the wealthy — as Obama has proposed — would still count as a giant tax cut, making it close to impossible to achieve the $1.2 trillion minimum deficit reduction target for the new joint committee.

The House GOP also contends that “the committee product must pass Congress, which means it must be scored by [the] CBO, using their baseline,” a House GOP aide said.

Boehner offered that line of reasoning to sell the deal to House Republicans. He used a PowerPoint presentation that declared tax increases would be “essentially impossible.”

But the White House and Congressional Democrats take issue with Boehner’s argument.

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