In a marked shift, Republicans are now willing to close some tax loopholes as part of a final deal to raise the nation’s legal borrowing limit, House Majority Leader Eric Cantor (R-Va.) said Wednesday.
But Cantor said that raising taxes was still off limits in negotiations to raise the $14.3 trillion debt ceiling by the Aug. 2 deadline.
July 5 (Bloomberg) -- Michael Purves, chief market strategist and head of derivatives research at BGC Financial LP, talks about U.S. fiscal policy and the debt ceiling.
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“If the president wants to talk loopholes, we’ll be glad to talk loopholes,” Cantor said at his weekly roundtable with reporters. “We’ve said all along that preferences in the code aren’t something that helps economic growth overall. But listen, we’re not for any proposal that increases taxes, and any type of discussion should be coupled with offsetting tax cuts somewhere else.”
Republicans have rebuffed Democrats’ calls for any comprehensive deficit-reduction package to close tax loopholes such as those for corporate jet owners and oil and gas companies. Such measures, GOP leaders have said, should be considered only as part of a comprehensive tax-reform effort.
That position seemed to hold firm for Senate Republican leaders on Wednesday as they balked at Cantor’s new openness to closing the loopholes.
Senate Minority Leader Mitch McConnell (R-Ky.) reiterated that the closing of loopholes should be a separate debate in talks about tax reform.
“I’m open to tax reform,” McConnell said. “We need to do it broadly. To sort of cherry-pick items in the context of this current negotiation with the White House strikes me as pretty challenging.”
McConnell said that ending tax preferences is a “big, complicated subject” and that targeting certain industries could hurt the economy. “We want to tackle deficit reduction in a way that doesn’t exacerbate unemployment,” he said.
Cantor’s apparent turnaround, however, is an indication that some Republicans are cracking open the door to addressing those loopholes if they’re accompanied by tax cuts elsewhere, such as an extension of the payroll tax holiday or changes to the alternative minimum tax.
But Senate Democrats said Wednesday that the door still isn’t open wide enough. They cast Cantor’s comments as evidence that they had put Republicans “on their heels” over taxes. But they criticized him for insisting that the closing of any loopholes be balanced by more tax cuts.
“If Republicans are going say we can only close these loopholes in a revenue-neutral way, it is like taking one step forward and then two steps back,” Sen. Charles Schumer (D-N.Y.) said in a statement. “The point isn’t to get rid of these loopholes simply to pay for new tax breaks elsewhere, it’s to do it in a way that contributes to the reduction of the debt.”
The Senate GOP’s reaction to Cantor’s new openness on the tax issue could suggest an emerging split in strategy between the House GOP majority and their Senate counterparts, who are eyeing the 2012 election in hopes of winning back the chamber from Democrats.
Sen. Jon Kyl (R-Ariz.) noted that President Obama has said he wants to insert the tax discussion into debt talks as a way to increase revenue, and he stuck to the position that Republicans reject ending subsidies and loopholes to raise new dollars.
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