Posted by: Heinz Brisske
In response to Treasury Secretary Timothy Geithner’s proposal for approximately $1.6 trillion in tax increases, the Republican Congressional leadership submitted their response. The Republican plan proposes $800 billion in new revenue and approximately $1.4 trillion in savings by reducing the growth in federal spending.
John Boehner (R-OH) compared the Republican proposal to a potential compromise plan discussed by Erskine Bowles, Co-Chair of the National Commission on Fiscal Responsibility and Reform. Boehner suggested that his plan produces new revenue “through pro-growth tax reform that closes special-interest loopholes and deductions while lowering rates.” The plan also creates $900 billion in mandatory spending reductions and $300 billion in discretionary spending savings. But Erskine Bowles, in a press release, emphasized that the Boehner plan was not the same as the “Simpson-Bowles” plan.
In rejecting the Republican plan, White House Communications Director Dan Pfeiffer stated, “Their plan includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close, or which Medicare savings they would achieve.”
The bottom line is that there has been no significant progress in the “fiscal cliff” negotiations over the past week. Speaker Boehner used the term “stalemate” to describe the situation. Strictly from a timing standpoint, it will be extremely difficult for the House and Senate to pass a tax bill prior to the end of the year. President Obama and Democratic leaders suggest that it will be necessary for the Republican House to pass the middle-class tax bill previously enacted by the Senate, thereby avoiding tax increases for everyone except upper-income taxpayers. However, even under that scenario, substantial questions would remain regarding both adjustment of the Alternative Minimum Tax and the tax extenders. Stay tuned.