Senate conservatives split over tax reforms in deficit reduction strategy

Senate conservatives are split over a strategy for reducing federal spending over the long-term future, an issue they plan to force when Democrats attempt to increase the national debt ceiling later this year.

Some are concerned that a deficit reduction package being negotiated by Sens. Tom Coburn (R-Okla.) and Mike Crapo (R-Idaho), two of the chamber’s leading conservatives, could include hundreds of billions of dollars worth of tax hikes.

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Coburn and Crapo, members of President Obama’s fiscal commission, voted last year for a proposal to cut spending, reform entitlements and overhaul the tax code. The fiscal commission’s proposed tax reforms would raise an estimated $785 billion between 2012 and 2020.

Coburn and Crapo are negotiating with Senate Budget Committee Chairman Kent Conrad (D-N.D.) and Democratic Whip Dick Durbin (Ill.) to craft a deficit reduction package that would follow up on the guidelines set out by the fiscal commission.

Some conservatives in the Senate worry that Coburn, Crapo, and a third negotiator, Sen. Saxby Chambliss (R-Ga.), might endorse tax reforms that would increase the total amount the federal government collects in taxes.

“The Republicans involved in this are miscalculating the environment right now,” said a GOP aide. “We’re marching on with the House and Senate Republicans united over reducing government spending, shrinking the size of government.

“We have the wind at our backs,” said the aide. “The best way to stop that momentum is have some Republicans and respected conservatives break off and talk about tax increases,” said the aide.

Coburn defended his role in the negotiations in an op-ed published Wednesday in the Atlanta Journal-Constitution.

Coburn wrote that “everything has to be on the table” in the budget debate.

“There can be no sacred cows and pet priorities,” he wrote. “Most of all, the American people have to know that we are willing to sacrifice our political careers in order to do the best thing for the country.”

Coburn also defended his support for tax reform as a member of the fiscal commission.

“Sen. Mike Crapo and I backed tax reform that would lower rates dramatically, stimulate economic growth and generate revenue by doing away with dysfunctional subsidies such as that for ethanol,” Coburn wrote.

Ryan Ellis, the tax policy director at Americans for Tax Reform, a group that advocates for lower taxes, said tax reform must not have the net effect of a tax increase.

“The 1986 tax reform act lowered rates, broadened the base but did so in a tax revenue-neutral way,” he said. “Under no circumstances can tax reform be a tax increase.”

Another Senate GOP aide said tax reform that increases net government revenues is the same thing as a tax hike, which many Republicans have pledged to oppose.

“Many of them have signed pledges to never support tax increases or a net tax increase,” said the aide. “You can put as much lipstick on it as you want, it’s still a pig. The problem we have is a spending problem, not a taxing problem.”

Coburn spokesman John Hart pushed back against the criticism.

“The debt commission proposal called for lower tax rates while doing away with numerous anti-growth tax expenditures,” Hart said. “Good tax reform lowers rates while broadening the base. Doing nothing, on the other hand, will invite the mother of all tax hikes.”

Hart said aides who are concerned about the talks with Conrad and Durbin should recommend specific spending cuts and encourage their bosses to stop new spending bills instead of “speculating about negotiations."

Crapo spokeswoman Susan Wheeler said: “The senator continues to work with the group and other than that we don’t comment on the specifics.”

Durbin said the deficit reduction package may be considered in conjunction with legislation to increase the debt ceiling above $14.3 trillion, which is expected later this spring.

Some conservatives such as Sens. Jim DeMint (R-S.C.), Mike Lee (R-Utah) and Rand Paul (R-Ky.) want tax increases taken off the table.

They would prefer Congress adopt a balanced budget amendment that would require supermajority votes in the Senate and House to increase taxes.

“As far as my boss is concerned, raising taxes is completely off the table,” said an aide to Lee. “He’s adamant that we don’t have a revenue problem, we have spending problem. The only thing on the table is spending cuts.”

Conrad says tax reform should be on the table. He often notes that non-security discretionary spending amounts to 12 percent of the federal budget.

The Wall Street Journal
reported earlier this month that Conrad, Durbin, Crapo and Coburn were considering legislation that would trigger new taxes and budget cuts if Congress fails to meet spending targets and other fiscal goals.

Americans for tax reform sent letters to Crapo, Coburn and Chambliss warning that increasing net taxes through tax reform would violate the group’s Taxpayer Protection Pledge.

The three GOP senators responded with a letter assuring Grover Norquist, president of Americans for Tax Reform, that they had not signed onto any proposal to increase taxes.

“Like you, we believe tax hikes will hinder, not promote economic growth,” they wrote.

The senators, however, defended tax reform.

“As you know, the current tax code has become burdensome and complex and filled with provisions which only benefit a limited portion of Americans, at the expense of higher rates for all Americans,” they wrote.