Politico
December 04, 2012

Top tax writers mull alternatives

Senate Finance Committee Chairman Max Baucus has been standing firmly behind the White House as negotiations to avert the fiscal cliff inch steadily toward the brink.

But that doesn’t mean he’s stopped working on a plan of his own.

“The president and speaker are the prime movers; they’re the main negotiators right now. The ball is in their court to be worked out,” Baucus told reporters on Tuesday. He later added, “We’re working on a plan B.”

While they would do much of the heavy lifting if the fiscal cliff yields a deficit reduction plan, tax writers in the House and the Senate have been patiently waiting as President Barack Obama and House Speaker John Boehner publicly hash out their opening bids.

Baucus and his counterpart, House Ways and Means Committee Chairman Dave Camp (R-Mich.), have been advisers and cheerleaders for the partisan plans already on the table. Camp speaks with Boehner daily and Baucus has weekly meetings with Treasury Secretary Timothy Geithner.

But like Baucus, Camp told POLITICO that House tax writers aren’t sitting on their hands. “I think we are all thinking about what are our options as we get closer and closer to the date,” Camp said. “I think any responsible legislator would be trying to think about what the alternatives might be.”

The details of what Baucus has in mind are fuzzy at best. At an event sponsored by Fix the Debt coalition Tuesday, the Montana Democrat called for a solution that avoids “gimmicks and triggers” to raise revenue before the end of the year and set the stage for a total overhaul of the tax code later.

“We need real, significant new revenues. Once that revenue is locked in, then we can turn to overhauling our tax code.” Baucus said. “I’ve been developing a plan that will help create jobs through smart innovation and expand opportunity.”

A big part of that plan, according to Baucus, combines direct tax increases on high-income earners and savings from existing budget proposals to draw the deficit down by $4 trillion over the next decade. But that math includes some savings that have raised eyebrows in budget circles and would likely draw little support from the GOP.

“The Budget Control Act banked $1 trillion. Bringing our troops home from Iraq and Afghanistan saves another $800 billion,” Baucus said. “Those are real savings and should be counted. Interest savings provide another $600 billion. And there is no reason we can’t come together to find at least $2 trillion in additional deficit reduction, getting us to more than $4 trillion.”

Those war savings have been widely criticized by Boehner and many budget experts as a gimmick to count unspent money as net savings. Boehner has rejected using those funds to pay for new spending on several occasions.

Baucus has been floating elements of his nascent plan in recent days but has stopped short of releasing anything that could directly compete with the White House plan. Last week Baucus opened the door to an extension of the payroll tax cut and unemployment funding but took issue with White House stances on the estate and dividends taxes, as lawmakers negotiate a fiscal cliff package.

“It could be that with the increase in rates that a payroll tax extension could be helpful to soften the adverse effects of a partial cliff,” Baucus said last week. “This is a debt reduction and we also have to look at the economy and find where we draw that line. The payroll tax plays a role in trying to find an answer to that question. Unemployment insurance is also in there.”

Democrats have been coalescing around individual elements of the White House proposal since Geithner began shopping it to Congressional leaders last week. If talks fall apart, Baucus could be well positioned to offer an alternative that would include an extension of the middle class tax rates, immediate spending cuts and an agreement with Camp to begin a total overhaul of the tax code.

Camp and Baucus, who meet or talk weekly, have been in frequent contact in recent weeks. Last week the two committee chairs huddled privately and staff members to both chairmen met Monday to discuss tax reform.

“I work with [Baucus] on a lot of issues and we’re staying in close touch,” Camp said.

Baucus said Tuesday that “I’m committed to tax reform, and I could have no better partner in this mission than my good friend Dave Camp. … We have a lot of work to do in a short amount of time, but I am optimistic. We can restore confidence in America. A balanced solution will provide America a fiscal course correction.”

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