GOP Senator Johanns Signals Openness on Tax Rates

Friday, 07 Dec 2012 04:30 PM

 

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Republican Senator Mike Johanns, a participant in bipartisan budget talks, signaled that he is open to higher tax rates for top earners if paired with significant changes in spending on entitlement programs.

Johanns is willing to “lean forward” on higher taxes if Democrats will do the same on spending cuts, he said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

“There is an opportunity there,” said Johanns, 62, of Nebraska. “Work with me on what’s driving the higher spending that literally we’re struggling with as a nation, our entitlements, and I will work with you on revenue.”

He said the “probabilities are still good” that lawmakers will reach a deal to prevent the so-called fiscal cliff.

What won’t be part of a year-end deal, Johanns said, is an agreement to increase the $16.4 trillion debt ceiling. President Barack Obama has proposing removing the requirement that Congress take affirmative votes to raise the limit. Democrats want that issue dealt with as soon as possible, and Republicans see it as leverage to get spending cuts in 2013.

“It is hard for me to imagine that you address all of that in the next three weeks, and he doesn’t need it in the next three weeks,” Johanns said. “We have time on that one, not a huge amount of time, but we can face that after the first of the year.”

Deficit Reduction

Johanns, a member of the so-called Gang of Eight group of senators working on a deficit-reduction deal, spoke less than a month before more than $600 billion of automatic spending cuts and tax increases are scheduled to take effect.

Johanns’s work in that bipartisan group has been based in part on the fiscal plan outlined by Democrat Erskine Bowles and Republican Alan Simpson, the co-chairmen of Obama’s 2010 deficit commission. That plan called for lower tax rates and more revenue than Obama’s budget does.

A year-end agreement, Johanns said, would include a “down payment” from each side that would lock in spending cuts and tax increases.

For spending, he suggested switching to an alternate measure of inflation that would reduce future increases in Social Security benefits. Senate Majority Leader Harry Reid, a Nevada Democrat, has rejected that idea as equivalent to a cut in benefits.

‘Ingredients are There’

“The ingredients are there,” said Johanns, who was Nebraska governor and then agriculture secretary for President George W. Bush. “We just need to see the talks continue.”

On taxes, Johanns said House Speaker John Boehner’s proposal for $800 billion in higher tax revenue over the next decade, without raising tax rates, marked a significant step for Republicans.

“The important thing here is if you read between the lines, Speaker Boehner’s proposal involved revenue,” said Johanns, first elected to the Senate in 2008. “That’s a huge step. Don’t minimize the importance of that step.”

As he talks to constituents, Johanns said, he has been preparing them for the difficult choices in overhauling the tax code and pointing out the tradeoff between tax rates and breaks for mortgage interest and charitable contributions.

‘Popular Stuff’

“It’s the popular stuff,” he said. “It’s the stuff that the average citizen loves.”

A $4 trillion deficit-reduction package, not including budgetary gimmicks, would mark a “giant step in the right direction” that would give confidence to businesses and investors, Johanns said.

“If we could just find the key to unlock this door to a budget agreement, I just think it unleashes economic opportunity for everybody,” he said.

Johanns warned against “gimmicky” approaches such as assuming $800 billion in savings from winding down the wars in Iraq and Afghanistan. That is likely to occur anyway and can be counted by congressional scorekeepers.

Obama’s framework and Boehner’s outline both would require relying on those war savings to achieve more than $4 trillion.

© Copyright 2014 Bloomberg News. All rights reserved.

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