The top Republican tax writers in Congress warned business groups that supporting President Barack Obama’s tax plan may cost them a chance at cutting the corporate rate, as U.S. budget talks headed into the weekend with no compromise in sight.
Representative Dave Camp of Michigan and Senator Orrin Hatch of Utah were responding to the White House’s efforts to court corporate chief executives, which culminated in a Dec. 11 Business Roundtable letter expressing openness to a tax rate increase for high-earning individuals.
“There simply is not enough money on the individual side of the tax code to achieve the size of tax increases the president is seeking,” Camp and Hatch wrote yesterday in a letter to the Business Roundtable and the National Federation of Independent Business. “In endorsing the president’s push for higher tax rates, you are also risking some of your own top priorities for tax reform,” such as reducing taxes on profits earned overseas and the corporate tax rate, they wrote.
Obama has used public backing from chief executives such as Lloyd Blankfein of Goldman Sachs Group Inc. to help make his case for higher tax rates for top-earning individuals. Obama wants the higher rates as part of an agreement to avert more than $600 billion in automatic spending cuts and tax increases scheduled to start in January.
Obama and House Speaker John Boehner met Dec. 13 and didn’t announce any progress toward an agreement. Boehner went home to Ohio for the weekend.
Camp and Hatch want Congress to start an overhaul of the individual and corporate parts of the tax code in 2013. They accused Obama of trying to “divide the business community” over a tax overhaul. Camp is chairman of the House Ways and Means Committee, while Hatch is the top Republican on the Senate Finance Committee.
“It’s important that the business community work together to drive the economy and create jobs,” Matt Miller, vice president of tax and fiscal policy at the Business Roundtable, said in a statement. “Comprehensive tax reform coupled with entitlement reform and economic growth should be job number one next year.”
Obama has called for lowering the corporate tax rate to 28 percent from 35 percent for most companies while increasing the top rate on individuals to 39.6 percent from 35 percent.
That would raise taxes for companies that pay through their owners’ individual returns, which are typically smaller, although they also include some businesses such as global law and accounting firms. Republicans want to lower the corporate and top individual rates to 25 percent.
Meanwhile, 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 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.
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 yesterday.
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 three basis points to 1.7 percent after rising earlier to 1.75 percent, the highest level since Nov. 7.
The White House meeting 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 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.”
Boehner spokesman Mike Steel declined to comment. Boehner, during his weekly news conference Dec. 13, didn’t rule out allowing a House vote on extending tax cuts for all except the top 2 percent of earners if a broader tax-and-spending deal isn’t reached soon.
Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, a Kentucky Republican, said in an e-mail yesterday 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.