By Alexander Bolton - 07/25/12 09:00 AM EDT
Sen. Mitch McConnell (Ky.) is floating a new plan to avert cuts to defense programs, but aspects of it might not pass muster with Grover Norquist, a powerful anti-tax activist.
McConnell said in an interview with The Hill this week that lawmakers could use offsets discussed last year by a group led by Vice President Biden. Those pay-fors included mandatory and discretionary spending cuts, land sales and spectrum sales as well as increases in federal fees.
Spending cuts and the sale of federal assets would be embraced by conservative members of the Senate Republican Conference. However, increasing federal fees could draw opposition.
McConnell’s comments reflect a growing urgency among Republicans on Capitol Hill about finding a compromise to stop $55 billion in spending cuts slated for defense programs in 2013.
Senate Majority Leader Harry Reid (Nev.) and other Democrats have insisted that any replacement of the so-called defense sequester also reduce cuts to domestic programs and raise new revenues.
Focusing on sales and federal fees could be a way to raise revenues without violating the tax pledge GOP lawmakers have made to their constituents.
John Kartch, director of communications at Americans for Tax Reform (ATR), the conservative anti-tax group headed by Norquist, said some fee increases would violate the Taxpayer Protection Pledge.
He said hiking fees to enter a national park, for example, would not be considered a tax increase because people can choose to visit state parks instead. But ATR views fees regulated on a condition of doing business as taxes.
McConnell spokesman Don Stewart said, “There were a lot of ideas raised in the Biden (and other) talks. Sen. McConnell didn’t specify which, but rather that there were a lot of ideas...he’s a fan of reducing Washington spending.”
Senate Minority Whip Jon Kyl (R-Ariz.), a member of the Biden-led negotiations, outlined the offsets that were on the table a year ago.
“Some would probably be agreed to by both Democrats and Republicans,” said Kyl. “Yeah, I think there is potential, both the mandatory and discretionary side on revenues.”
He listed land sales, spectrum sales, increases in pension guaranty fees, increases in fees related to Fannie Mae and Freddie Mac and an increase in a Transportation Security Administration fee.
“One of the items on there was an increase in a TSA fee category. That’s a little more controversial,” he said.
Kartch, the ATR spokesman, said it would be difficult to assess whether these fees violated the Taxpayer Protection Pledge without seeing specific legislation. An overwhelming number of Republicans in Congress have signed the pledge, which vows not to support any legislation that raises taxes without being fully offset by other tax cuts.
Norquist was traveling Tuesday and could not be reached.
Senate Finance Committee Chairman Max Baucus (D-Mont.), a member of the Biden group, said he and his colleagues had discussed closing niche tax breaks as well.
“They were on the table, but the Republicans didn’t want to get to revenue until we did all the spending cuts first,” he said.
Kyl, however, disputes that Republicans seriously contemplated closing tax loopholes during the Biden talks in an effort to cut the deficit by more than $2 trillion.
“If Democrats are saying that they would have liked to have been able to bring up tax increases but neither [House Majority Leader] Eric Cantor [R-Va.] nor I wanted to talk about tax increases, that’s a correct statement,” Kyl said. “But it would be incorrect to say that they were on the table to the extent that they were in the later discussions in the joint select committee, in which we spent hours and hours and hours, Democrats and Republicans, talking about different ways of raising revenues.”
Sen. John McCain (Ariz.), the senior Republican on the Armed Services Committee, has proposed eliminating niche tax breaks to avert defense cuts. Specifically, he has cited a plan floated in the fall by Sen. Pat Toomey (R-Pa.) that would have raised $250 billion in new tax revenue under a static scoring method.
But Toomey, a member of the 2011 deficit-reduction supercommittee, rejected that option Tuesday. He said the elimination of special tax breaks should be saved for a broader effort to overhaul the tax code next year.
“The changes in the deductions and other tax expenditures must be preserved for tax reform,” Toomey said during a question-and-answer session at the Brookings Institution.
“I’m in favor of reprogramming the cuts, looking at other areas to do some of that, but I don’t think it’s a good idea to go into the tax code,” he said.
Given the stiffening GOP opposition to closing special tax breaks to pay for the looming sequester, focusing again on the offsets discussed by the Biden group could provide an alternative way forward.
Still, Democrats would prefer to see substantial tax increases, such as closing corporate breaks or a variety of tax loopholes, instead.
“It’s a mistake to start offsetting one component of the sequester. The sequester was made tough on purpose in order to get the whole job done,” said Sen. John Kerry (D-Mass.), a member of the 2011 supercommittee, when asked about GOP efforts to stop automatic defense cuts.
“We’re not just going to look at a fee or an asset sale. We’ll look at revenue. Generic, broad-based revenue, and that’s what the fight is about,” he said.