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Finance Republicans Urge Supercommittee to Avoid Tax Rise

The congressional supercommittee charged with reducing the federal budget deficit should avoid tax increases, repeal the 2010 health-care law and address the eligibility age for Medicare, say Republicans on the Senate Finance Committee.

In a submission to the panel today, committee Republicans argue that tax increases would be counterproductive. Democrats, including President Barack Obama, say tax increases must be part of a balanced approach to deficit reduction.

Today is the deadline for congressional committee leaders to submit recommendations to help the supercommittee identify $1.5 trillion in savings over the next decade.

“While we are all committed to fundamental tax reform, tax reform must be a base-broadening and rate-lowering exercise that is revenue neutral against current tax policy,” wrote the senators, led by the panel’s top Republican, Senator Orrin Hatch of Utah. That means a revenue level equivalent to permanently extending the tax cuts enacted in 2001 and 2003.

The Republicans call for a tax code with top rates for individuals and corporations of no higher than 25 percent, from 35 percent now, and a system that exempts U.S. tax on profits earned overseas. The senators also said Congress should change the method for determining the budget impact of tax changes by incorporating economic growth estimates into the projections.

They also propose repealing the health-care law enacted in 2010, which would cost the government money, not save it, according to the Congressional Budget Office.

Medicare Eligibility Age

The proposed change in the eligibility age for Medicare, the federal health program for the elderly and disabled, resurrects a proposal that Obama left out of his deficit- reduction plan under pressure from AARP, which represents seniors, and other interest groups.

Hospitals and other health providers support increasing the eligibility age because younger seniors would move into subsidized private health plans with higher reimbursement rates than Medicare.

The Finance Committee Republicans propose converting Medicaid from an open-ended entitlement to states to a block grant, in which the federal contribution would be capped and states would have greater flexibility to control eligibility and benefits in the program. The idea is supported by many Republican governors, who chafe at limits on eligibility reductions included in the 2010 health-care law, and opposed by congressional Democrats and advocates for the poor.

Tax Overhaul

The recommendations were signed by nine of the 11 Senate Finance Committee Republicans. Those not signing it were Jon Kyl of Arizona and Olympia Snowe of Maine.

In a statement released today, Snowe said she agreed with many of her colleagues’ recommendations, including the tax overhaul and repeal of the health-care law. Her statement about points of agreement didn’t address the Medicaid block-grant proposal and the Medicare eligibility age.

“I am not a fan of the supercommittee process,” she said. “In my opinion, creating that vehicle puts the responsibility of 535 members of Congress on just 12 lawmakers. I am also disappointed there were no full committee hearings or any attempt to create bipartisan transmittal recommendations.”

The supercommittee, which has a Nov. 23 deadline to produce a recommendation, is charged with finding at least $1.2 trillion in savings.

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editors responsible for this story: Mark Silva at msilva34@bloomberg.net; Adriel Bettelheim in Washington at abettelheim@bloomberg.net

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