Sandy Levin: Tax, entitlement reform can only come after debt ceiling, sequester

By Bernie Becker - 01/15/13 02:39 PM ET

A senior House Democrat said Tuesday that Washington should proceed to tax and entitlement reform after dealing with looming fiscal deadlines.

Rep. Sandy Levin (Mich.), the top Democrat at the tax-writing Ways and Means Committee, said he thought progress could be made on taxes and entitlements after dealing with the debt ceiling and a raft of scheduled spending cuts.

But the Michigan Democrat also cautioned that progress would not be easy, and his remarks at a breakfast sponsored by The Christian Science Monitor underscored the challenges Washington faces on a range of fiscal issues.

“I’m not very confident. I am hopeful,” Levin said about the possibility for tax reform this year.

Levin said at the breakfast that he agreed with President Obama’s statement that there was no substitute — like the Constitution’s 14th Amendment or the so-called trillion-dollar coin that caught some buzz last week — for Congress raising the debt ceiling.

The Michigan Democrat also backed the president for saying he wouldn’t negotiate on the debt ceiling, and that any deal to undo the so-called sequester cuts would need to include some new tax revenue.

Obama has said that a mix of spending cuts and revenues — a “balanced” approach, Democrats say — should be on the table in future fiscal talks, but Republicans have said they won’t consent to new taxes beyond the $600 billion agreed to in the "fiscal cliff" deal signed early this year.

“I just want to be emphatic: There is no way to meet the requirements of sequestration without balance,” Levin said.

Levin added that, after the debt ceiling and sequester were resolved, he would be happy to sit down and discuss programs like Medicare, where Republicans have pushed to find savings. Social Security, another key entitlement program, is in stronger fiscal shape, Levin said.

On tax reform, the Michigan Democrat said there were several hurdles to finding a plan that would lower rates while scrapping tax incentives. Levin has long said that the goal of a 25 percent top tax rate for individuals and corporations set by the Ways and Means chairman, Rep. Dave Camp (R-Mich.), wasn’t realistic.

Levin also said that Democrats would want to use some of the savings from tax preferences for deficit reduction — unlike Republicans, who want to prune the code solely to pay for lower rates.

The top Democrat on Ways and Means did say that he preferred Obama’s proposal to limit the value of tax deductions to 28 percent for top earners to a plan, floated by some Republicans, to cap the amount of deductions a taxpayer can take.

The deduction cap, Levin said, could hurt charitable contributions more. But the Michigan Democrat also said that he didn’t back the president’s proposal “lock, stock and barrel” and that exceptions to the 28 percent limit might be needed.