House Dems: Closing special tax breaks not same as raising taxes

House Democrats have demanded that a deficit-reduction deal include measures to raise tax revenue but they argue those proposals shouldn’t be viewed as proposed tax increases.

Rep. James Clyburn (S.C.), the assistant House Democratic leader and a member of the debt-limit negotiating team, said Sunday that closing tax loopholes are not the same as tax increases.

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“The fact of the matter is, we have on the table all kinds of revenue raises that [Republicans] keep calling tax increases. How do you call closing loopholes to oil companies that are making billions of dollars in profits, closing up these loopholes that would generate $40 to $50 billion in revenue, how do you call that a tax hike?” Clyburn said on ABC News’s "This Week".

“That is no tax hike. You only hike taxes when you raise rates,” he argued.

Democrats have had a tough time dealing with the GOP argument that they want to raise taxes while national economic growth is at an anemic 1.9 percent. Republicans were able to use that line of attack to cow Democratic leaders into extending virtually all of the Bush tax cuts through 2012.

Democrats are adopting a new approach: arguing that raising revenues by closing niche tax breaks is not the same as raising taxes.

“We are not asking anybody to raise anybody's rates,” Clyburn said. “We want us to have an effective tax collection and close these loopholes, stop giving billions of dollars in breaks to millionaires and billionaires.”

House Democratic Leader Nancy Pelosi (Calif.), who has demanded a seat at the table in the final stage of deficit-reductions talks, backed Clyburn’s argument.

“You cannot achieve what you set out to do if you say it's just about cutting. It has to be about increasing the revenue stream as well,” Pelosi said Sunday on CNN’s "State of the Union".

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She said the deal should close special tax breaks, such as those enjoyed by major oil companies, but disputed House Majority Leader Eric Cantor’s (R-Va.) characterization of these proposals as tax increases.

“It's not a question of tax increases,” Pelosi said.

“Make sure we understand, closing special interests’ tax subsidies is what they have walked away from,” she said of Cantor’s decision to pull out of the debt-limit talks.

Pelosi says she must have a say in the deal if Republicans are to expect to win any Democratic votes to raise the debt ceiling. 

House Speaker John Boehner (R-Ohio) needed Democratic help in April to pass a package of budget cuts linked to a spending measure covering fiscal 2011. He is expected to suffer an even bigger defection of conservative Tea Party-affiliated lawmakers when the House votes on a compromise to raise the debt ceiling.

“If they expect Democrats to vote for the agreement, then Democrats will have to be part of the agreement,” Pelosi said.

Democratic strategists believe their best strategy for convincing Republicans to support raising additional revenues is to propose closing special tax breaks, such as the $6 billion subsidy for ethanol the Senate voted on last week.

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Thirty-three Republicans including Senate Republican Leader Mitch McConnell (R-Ky.) voted to end that tax break.

McConnell at a Wednesday breakfast sponsored by the Christian Science Monitor declined to say whether ending tax breaks such as the ethanol subsidy are the same as tax increases.

McConnell, appearing on ABC News's "This Week" Sunday, tried to steer the conversation away from changes to the tax code.

“Throwing more tax revenue into the mix is simply not going to produce a desirable result, and it won't pass,” McConnell said. “I mean, putting aside the fact that Republicans don't like to raise taxes, Democrats don't like to either.”

The GOP leader reiterated his argument that increasing the tax burden on private companies will slow the economic recovery, noting policymakers are depending on the private sector to reduce unemployment.

McConnell argued that cuts to Medicare are more likely to pass the Senate and House. He noted that Democrats found nearly $500 billion in Medicare savings when they passed the 2010 healthcare reform law.

“We know the Democrats are willing to reduce Medicare expenditures. That's something that can actually pass the Congress,” he said.

Updated at 1:55 p.m.