Oct 09 2012

Sen. Schumer Rejects Tax Reform Compromise

(4 pm. – promoted by ek hornbeck)

In a speech to the National Press Club, Senator Charles Schumer (D-NY) rejected the current compromise for a bipartisan deficit reduction plan that would prevent the trigger of tax increases and automatic spending cuts that go into effect on January 1. He stated that the compromise could not bring in more revenue by lowering the top tax rate and still protect the middle class from tax increases:

Specifically, he’s publicly urging Democrats to abandon a tax reform model that calls for ending tax expenditures, many of which benefit middle income earners, in order to finance a large tax rate cut for wealthier people. It’s a framework that’s popular among economists, particularly conservative ones, but that a group of Democrats negotiating with Republicans to avert large tax increases and sharp spending cuts next year have also embraced.

Instead, he proposes targeting tax loopholes and deductions that benefit top earners and raising their top income tax rate, while simultaneously narrowing the tax code’s preference for capital gains by ratcheting up the capital gains rate from its current, historically low rate of 15 percent. Taken altogether it’s a call for significantly more revenue from high-income earners than Dems have sought by proposing to allow the Bush tax cuts for top earners to expire; and an attempt to strengthen Dems’ negotiating posture, lest they get lured into conceding another large income tax cut for the wealthy.

Sen. Schumer proposes to freeze the top two tax bracket, cut the loopholes and deductions that benefit the top earners and raise the capital gains tax.

David Dayen at FDL News Desk notes that this would be a “major blow” to the Simpson-Bowles plan that would see the tax rates reduced to 23% for the top earners.

So how would Schumer get the Republicans to sit down at the table? As David point out, simple by dangling “entitlement” reform:

But there’s a giant caveat to all of this, based on the excerpts (haven’t yet found the full speech):

  But he says that Republicans should be drawn to such a deal by the prospect of a bipartisan bargain that also includes changes to improve the sustainability of entitlement programs. Those programs – such as Social Security and Medicare – are expected to run substantial shortfalls in the future, adding dramatically to budget deficits.

   “The lure for Republicans to come to the table around a grand bargain should be the potential for serious entitlement reform, not the promise of a lower top rate in tax reform,” Mr. Schumer is expected to say, according to excerpts of his speech.

So Schumer wants to trade unworkable “tax reform” for deeply unpopular “entitlement reform.” That’s not really a great trade. It’s good to acknowledge that tax reform will never work the way its most passionate advocates suggest. But if that doesn’t exist as a “get” for Republicans in a grand bargain, and entitlement cuts are the substitute, we have a whole different problem.

While Schumer claims that the concession on “entitlement” reform would not include privatization or a voucher program,  Atrios noted the Republicans have no interest in “reform” of entitlements unless it includes privatization and tax cuts for the wealthy. In other words, the chances of getting anything done have greatly increased.


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  1. TMC
  2. joanneleon

    a load of crap: “improve the sustainability of entitlement programs”

    Republicans are famous for chipping away at the most important programs and rights.  I read that the Koch brothers are on board with raising the tax rates in exchange for cutting Social Security and Medicare.  So I don’t think the lack of privatization will hinder them from going for this deal.  This is really dangerous. Schumer pretends he is a good liberal but we know what he really is.

    Cutting Social Security has long been a right-wing destructive wet dream.  But they’ve got the people in place on the so called Left to do it now.  I really hope that enormous push back can stop them but I have my doubts. What do they care?  They think people will calm down about it during the four years between this presidential election and the next, and both parties are loyal to the 1%.

  3. TMC

    The official WHaaa from McConnell’s office:

    “Sen. Schumer is now the second member of the Senate Democrat leadership to endorse ‘Thelma and Louise economics.’ Senior Democrats are now openly acknowledging their plan to hold the economy hostage to massive, job-killing tax hikes, and espousing the fiscally irresponsible view that says the country should be driven off the fiscal cliff rather than Congress working toward bipartisan solutions to reform and strengthen entitlements without killing jobs. And he admits that Democrats don’t intend to reform entitlements or our tax code as a means to restore fiscal sanity, create jobs, or protect our seniors, but rather to use the effort as a lure to entice support for even more job-killing tax hikes. The Speaker and I have called for extending all the income tax rates for a year, ensuring that no one sees an income tax hike in January and preventing the economic harm and massive job loss that will come if Sen. Schumer and Washington Democrats follow through on their threats to drive us off the fiscal cliff. This uncertainty needs to be dealt with sooner rather than later. We need to find a way to deal with the sequester not by cutting a penny less, but by intelligently making the decisions that are necessary to keep our promise to reduce the debt by $2.1 trillion and to get our economy back on track.”

    Damn those job killing taxes that haven’t done anything in the last 12 years to create jobs or reduce the deficit that didn’t matter to the Republicans in 2001

  4. TMC

    for the wealthy on the back of the rest of us and reducing the deficit is far into the future. This compromise is a ruse to accomplish just that.

    As of today there is crickets from the Democrats but the Republicans came out swinging, attacking Schumer for questioning the consensus. Senate Minority Leader Mitch McConnell issued this statement: “Sen. Schumer is now the second member of the Senate Democrat leadership to endorse ‘Thelma and Louise economics.'”

    House Speaker John Boehner defended the compromise:

    “A tax reform framework that lowers rates and closes loopholes has support from both parties, including the Obama Administration, and it offers the best hope for bipartisan efforts to create robust economic growth and reduce our deficit,” he said. “Sen. Schumer seems to be off on an island with these remarks.”

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