U.S. Chamber Stays Silent on Tax Increase Amid Overhaul Push

The U.S. Chamber of Commerce is urging the new congressional deficit-reduction committee to overhaul the tax code without taking a position on the central issue of whether higher taxes should be part of the proposal.

In a letter sent to the committee members yesterday, Bruce Josten, the chamber’s chief lobbyist, called for a “complete restructuring of the U.S. tax code” that would lower rates and make the tax code more efficient.

“The chamber urges you to consider how the current tax laws act as an impediment to worldwide competitiveness, a deterrent to saving and investment, and an obstacle to innovation and entrepreneurship,” he wrote on behalf of the nation’s largest business group. The chamber’s board includes executives from Pepsico Inc., WellPoint Inc. (WLP), AT&T Inc. (T) and Norfolk Southern Corp. (NSC)

Josten’s letter sidesteps one of the core issues dividing Democrats and Republicans on the 12-member joint committee. Democrats such as Senate Finance Committee Chairman Max Baucus of Montana are calling for a balanced approach that includes tax increases along with spending cuts. Republicans such as Dave Camp of Michigan, who leads the House Ways and Means Committee, are opposed to higher taxes.

Raising Revenue

Diane Lim Rogers, the chief economist at the Concord Coalition, an Arlington, Virginia-based group that advocates for deficit reduction, said she was encouraged by the letter, though the group didn’t mention a specific revenue target. Rogers said the letter places a tax overhaul next to entitlement spending as part of the work for the joint committee. That’s the same formula used by bipartisan groups that have called for tax increases as an element of deficit reduction.

“What they’re saying very carefully is that there are ways to raise revenue that are not harmful to the economy,” said Rogers, a former Democratic staff member on the Ways and Means Committee.

When asked questions about the chamber’s stance, including whether the group would support an agreement that would pair $10 in spending cuts for every $1 in tax increases, spokeswoman Blair Latoff referred to the letter and said it speaks for itself. All the Republican presidential candidates who participated in a debate in Iowa last week said they would reject such a deal.

Automatic Cuts Loom

The joint committee, with Democratic Senator Patty Murray of Washington and Republican Representative Jeb Hensarling of Texas as co-chairmen, was given the task by the recent debt- ceiling law of finding $1.5 trillion in deficit reduction by Nov. 23. The House and Senate must vote on the recommendations by Dec. 23.

If the committee doesn’t reach an agreement or its recommendations don’t become law, automatic spending cuts would occur, starting in 2013.

The letter doesn’t say the chamber would oppose a tax overhaul that raised more revenue than the current tax system does. Josten did say that tax changes shouldn’t single out industries.

Democrats, sensing the difficulty of rewriting the tax code in three months and trying to persuade Republicans to back higher revenue, have been discussing the same targeted tax increases that President Barack Obama has supported in the past. Those proposals would raise taxes for oil and gas companies, private equity managers and corporate-jet owners.

Cantor Warning

In a memo sent to House Republicans today, Majority Leader Eric Cantor of Virginia warned of the damaging effects of higher taxes.

“It is in everyone’s interest -- especially small business job creators -- for the deficit-reduction committee to report and for Congress to enact at least the $1.5 trillion in spending reductions called for without a tax increase,” he wrote.

Compared with his statements on taxes, Josten was clearer in his prescription for how the committee should address spending on government health-care and retirement programs.

“Entitlement spending is out of control, on autopilot, and leading America toward fiscal disaster,” he wrote. “Moreover, Congress cannot fix the root cause of the problem without addressing the entitlement programs of Medicare, Medicaid and Social Security.”

The chamber’s lack of emphasis on revenue neutrality in a tax overhaul leaves open the possibility that the group could ultimately support higher taxes as part of a broader proposal, said Michael Linden, director of tax and budget policy at the Center for American Progress, which often agrees with Democrats.

“They’re laying down a marker on what tax reform should look like, very broadly, but they haven’t said that revenue has to stay at the same level it is now,” he said.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

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

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.