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Senate Republicans Said to Discuss Tax Cut Fallback Plans

Senate Republicans are discussing a legislative strategy to break the U.S. budget stalemate that would let Congress extend tax cuts for all except the highest income levels, said two Republican aides who spoke on condition of anonymity.

Under this scenario, the Republican-controlled House would vote on two separate bills, the aides said. One would extend tax cuts for all income levels. That would have wide Republican support though President Barack Obama has said he won’t accept it.

The other bill would allow tax cuts for top earners to expire, as Obama demands. Democrats would support that plan and Republicans would be likely to provide enough votes to pass it in the House, one aide said. The Democratic-controlled Senate would pass and send that measure to Obama, the aide said.

Such an approach would let Republicans go on record in support of extending all of the George W. Bush-era tax cuts even as enough of them would join Democrats to pass Obama’s plan.

Obama and House Speaker John Boehner, an Ohio Republican, met at the White House yesterday for almost an hour to discuss the budget, with no public announcement of progress. In January, more than $600 billion in spending cuts and tax increases, the so-called fiscal cliff, are scheduled to begin unless the president and Congress agree on a way to avert them.

‘Lot of Ideas’

White House press secretary Jay Carney declined to comment on the possible strategy, saying “there are a lot of ideas floated” at the Capitol.

“What we have yet to see is a proposal of any kind with any kind of specificity,” Carney said.

Stocks fell, as the Standard & Poor’s 500 Index fell 0.4 percent to 1,413.71 at 4 p.m. New York time. Treasuries rose for the first time in four days as consumer prices fell. The yield on the 10-year note decreased two basis points to 1.71 percent after rising earlier to 1.75 percent, the highest level since Nov. 7.

Yesterday’s White House meeting, which included Treasury Secretary Timothy Geithner, didn’t close the gap between Obama’s demand for higher taxes for top earners and Boehner’s call for deeper spending cuts, said a Republican congressional aide who spoke on condition of anonymity.

Obama’s wants to extend tax cuts now for income up to $200,000 a year for individuals and $250,000 for married couples. Some Senate Republicans have discussed acceding to Obama’s demand if the president and Boehner can’t reach a budget deal by year’s end.

‘Off the Table’

“It seems to me getting that off the table would be helpful,” Maine Republican Senator Susan Collins said in an interview. “Everyone agrees that should be done.”

Several House Republicans, notably Oklahoma Representative Tom Cole, have suggested allowing the top rates to increase as a legislative tactic.

Boehner spokesman Mike Steel declined to comment. Boehner, during his weekly news conference yesterday, didn’t rule out allowing a House vote on extending tax cuts for income up to $250,000 a year for married couples, as Obama has demanded, if a broader tax-and-spending deal isn’t reached soon.

“The law of the land today is that everyone’s income taxes are going to go up on Jan. 1,” Boehner said when asked by reporters if he would rule out such a vote. “I have made it clear I think that is unacceptable. Until we get this issue resolved, that risk remains.”

Protecting Jobs

Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, a Kentucky Republican, said in an e-mail today that “Republicans will continue to look for ways to protect American families and jobs while strengthening entitlement programs and continuing to advocate for the types of intelligent reforms in Washington spending that the president has yet to propose.”

McConnell “does not advocate raising taxes on anybody or anything,” Stewart said.

Sixty-five percent of Americans say Obama has a mandate for his plan to increase taxes for top earners, according to a Bloomberg National Poll of 1,000 adults conducted Dec. 7-10.

Obama and congressional Democrats say they won’t discuss spending cuts unless Republicans agree to higher tax rates for top earners. Republicans are insisting on reductions to entitlement programs such as Medicare.

White House and congressional officials told their staffs this week that they may be spending the holidays in Washington, as both sides publicly refused to budge from their positions. Boehner is traveling to his home state of Ohio for the weekend.

To contact the reporter on this story: James Rowley in Washington at jarowley@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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