Sen. John Kerry, a member of the super committee, has met with other Democratic members of the panel to chart a path toward an agreement on deficit reduction.
Super committee Democrats wanted Republicans to come back at them with a revised offer for deficit reduction — and though the GOP did just that Tuesday, it was immediately clear that the second Republican proposal was no more palatable to Democrats than the first.
But the new plan marked the first sign of movement by the GOP on the question of whether some taxes can be raised to achieve the panel’s $1.2 trillion to $1.5 trillion deficit reduction target.
Republicans came to the table with a package — crafted in large part by Sen. Pat Toomey (R-Pa.) — worth $1.2 trillion in savings over the next decade, according to multiple sources of both parties familiar with the talks. The new GOP plan would include $250 billion in savings from eliminating tax deductions for high earners, $40 billion in changing how the consumer price index is calculated, and various other non-tax savings that had been included in the previous Republican offer.
In exchange for raising some taxes, the GOP proposal would lock in the rates of the 2001 Bush tax cuts, which were extended last winter by President Barack Obama. Democrats, both inside and outside the room, widely panned the idea and were quick to highlight that allowing those tax cuts to expire could bring in $3 trillion to $4 trillion of savings over 10 years.
“In other words, locking in tax cuts for the very wealthy? Right? Then adding close to $4 trillion to the deficit? Is that correct? I’m not going to get into detail, but I think you get an idea,” Rep. Chris Van Hollen (D-Md.) said wryly to a small group of reporters outside the Senate Foreign Relations room where several Democratic Members met Tuesday afternoon.
It was not immediately clear whether the new Republican plan would impose the same levels of Medicare cuts to beneficiaries, to the tune of $200 billion, as their first offering proposed. It would, according to both Democratic and Republican sources, drop the marginal tax rate to 28 percent, which one top Democratic aide called “a raw deal if you’re a middle-class taxpayer.” This source said it likely would be impossible to both lower tax rates to the Republicans’ proposed levels and hit their advertised savings just by eliminating tax code deductions.
For context, the Bowles-Simpson recommendations suggested capping the individual tax rate at 28 percent and eliminating deductions but also addressed taxes on capital gains and dividends, neither of which were broached in the current GOP offering.