House Speaker John Boehner (R-Ohio) on Thursday said closing tax loopholes “needs to come as part of overall tax reform,” potentially dealing a blow to Senate efforts to use such revenue to offset the elimination of scheduled defense cuts.
Sens. Lindsey Graham (R-S.C.) and John McCain (R-Ariz.) are discussing a deal that would raise $40 billion to $50 billion in new revenue by closing some tax loopholes and increasing fees. The money would help cancel out much of the $55 billion in Pentagon cuts that are scheduled for 2103.
But House Republicans are intent on using many of those revenue sources to offset the cost of lowering the corporate and individual income rates in a broad tax overhaul.
“Raising taxes in a weak economy is not a good idea,” he said. “If we’re serious about bringing down rates, both corporate rates and personal rates, closing those loopholes, those special deals and other credits that are in the tax code, needs to come as part of overall tax reform.”
Both Republicans and Democrats have said they want to find a way to scrap or postpone the Pentagon cuts, but Democrats are demanding that tax revenue be included in any deal. Under Grover Norquist’s Taxpayer Protection Pledge, which nearly all congressional Republicans have signed, increases in tax revenue must be offset with tax cuts and cannot simply go toward deficit reduction.
The looming spending cuts are likely to be lumped into either a short-term or long-term agreement dealing with the expiration of the George W. Bush-era tax rates after the November election.