Taxes key as budget talks start in private

 

McClatchy Newspapers

Senate leaders worked feverishly behind closed doors Saturday to avert the most painful parts of a looming fiscal crisis, debating which taxpayers could or should pay more as part of a deal that would ward off looming tax increases for everyone.

Senate Majority Leader Harry Reid, D-Nev., and Senate Minority Leader Mitch McConnell, R-Ky., were racing to forge a deal in time for votes Sunday night by both the Senate and the House of Representatives. Their aides met privately in a nearly deserted Capitol.

Lawmakers expected to be briefed by Sunday afternoon, though some were skeptical a compromise could be reached. Most lawmakers were absent Saturday, awaiting word from their leaders.

Failure to reach agreement by the end of the year Monday evening would mean that all Bush-era tax cuts would expire for all taxpayers, an Obama cut in the payroll tax for Social Security would expire, jobless benefits would dry up for 2 million unemployed, the alternative minimum tax would hit more taxpayers, Medicare payments to doctors would be cut, and $109 billion in federal government spending cuts would start, the first installment toward $1.2 trillion in cuts.

At the center of the private talks Saturday was the question of which Bush-era tax cuts to extend, with Democrats pushing to extend only those on individual income below $200,000 and family income below $250,000, which would mean a tax increase for all income above that. Republicans had been pushing to extend all of the tax cuts, but people close to the talks said they would be open to taxing top wage earners, perhaps those making $400,000 or above — as Obama had offered as part of an earlier compromise offer.

Negotiators were discussing four other issues as part of a possible scaled-back package -- unemployment benefits, the alternative minimum tax, Medicare payments to doctors and the extension of tax breaks offered to companies and individuals, according to a congressional aide familiar with the talks but not authorized to speak publicly.

But some of the painful measures were increasingly likely to take effect, at least temporarily.

No one was known to be pushing to extend the cut in the payroll tax, enacted as a temporary measure to put more cash in people’s pickets in hopes of stimulating the economy. If the cut expires Monday night, every taxpayer would see their paychecks shrink as that tax goes back to 6.2 percent from 4.2 percent.

And a final deal was not expected to include changes to Social Security or Medicare, even though Democrats and Republicans had at one point agreed to apply a less-generous measure of inflation to the government programs to lower cost-of-living adjustments or an increase in the debt limit, which will be reached Monday.

The automatic cuts to spending would also likely go forward after House Republican signaled that they would not agree to stop them unless or until they could forge a deal for long term spending cuts.

If Reid and McConnell fail to reach any agreement, Obama will ask Congress to vote on his original proposal to raise taxes on individual income above $200,000 and family income above $250,000, and also to extend jobless benefits for 2 million unemployed workers.

“I believe such a proposal could pass both houses with bipartisan majorities – as long as these leaders allow it to come to a vote,” he said in his weekly radio address Saturday “If they still want to vote no, and let this tax hike hit the middle class, that’s their prerogative – but they should let everyone vote. That’s the way this is supposed to work.”

As the talks commenced, Obama and Republicans went to the airways to restate their public positions one more time, either aiming to run up public pressure, or lay the groundwork to blame the other party.

“It’s a balanced plan – one that would protect the middle class, cut spending in a responsible way, and ask the wealthiest Americans to pay a little more,” Obama said in his weekly radio address. “And I’ll keep working with anybody who’s serious about getting a comprehensive plan like this done – because it’s the right thing to do for our economic growth.”

Republicans, in their radio address rebuttal, said they agree with Obama about sparing millions of Americans from economic hardship. They just disagree with some of the ways to do it.

“The president’s proposal to raise taxes on the top 2 percent of Americans won’t even pay one-third of the annual interest that’s now owed on this massive $16 trillion debt,” Sen. Roy Blunt, R-Mo., vice chair of the Senate Republican Conference, said in his party’s radio message. “We still can avoid going over the fiscal cliff if the president and the Democrat-controlled Senate step forward this week and work with Republicans to solve this problem and solve it now.”

Blunt suggested that Senate negotiators already have a blueprint to work with to avoid the fiscal cliff in legislation passed earlier this year by the Republican-controlled House, including an August vote to extend President George W. Bush-era tax cuts for all incomes for one year.

“The House has already passed bills to protect all Americans from burdensome tax increases,” Blunt said. “But instead of working across the aisle and considering the House-passed plan to protect taxpayers, Senate Democrats have spent months drawing partisan lines in the sand.”

To keep pressure on Congress, Obama will sit for an interview with NBC’s “Meet the Press.” It is his 11th appearance on the show but only his second as president. His last appearance was in September 2009 during the battle over revamping the nation’s health care system.

Email: wdouglas@mcclatchydc.com, akumar@mcclatchydc.com; Twitter @williamgdouglas, @anitakumar01

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