House Republicans at odds over revenue issue in budget talks

Republican harmony over new budget talks is already starting to break down, days before a negotiating committee is scheduled to meet for the first time. 

The split for the GOP is over whether they should put revenue increases on the table – a no-go for many in the Republican rank-and-file – as they shoot for their longtime goal of restraining entitlement spending. 

Rep. Tom Cole (R-Okla.), one of four House GOP conferees, said multiple times this week he could back new revenues if it helped to get a deal, most recently in an interview with Bloomberg Television. 

“The reality is, you're going to have to have a deal here,” said Cole, an ally of Speaker John Boehner (R-Ohio). “And a deal means everybody gives something up.”

But the top GOP negotiator, House Budget Chairman Paul Ryan (Wis.), immediately pushed back on that idea through a spokesman, and it remains unclear how many Republicans are willing to discuss revenues. 

“Chairman Ryan wants to find common ground with his colleagues to pay down the debt, provide relief for families, and grow the economy,” the spokesman, William Allison, told The Hill in a Friday statement. 

“Chairman Ryan believes the best way to raise revenue is to grow the economy. We should not take more from hardworking families to spend more in Washington.”

The divide underscores the difficult path that the budget conferees have in reaching a deal by their Dec. 13 deadline, given that Democrats and Republicans enter negotiations deeply divided about how to proceed on fiscal matters. 

The budget conference, which includes more than two dozen lawmakers from both chambers and both parties, meets for the first time on Wednesday.

Still, Democratic on Capitol Hill saw Cole’s comments as an opening, as they push to ensure that the revenue side is included in any final deal. 

Many GOP lawmakers have said that the $600 billion in this year’s fiscal cliff deal – which included tax rate hikes on the highest earners – is more than sufficient.

And Ryan, according to fellow Republicans, told a meeting of conservatives this week that he believes that automatic sequestration cuts will ultimately get Democrats to deal, and that he won’t get behind new revenues.

Democrats are seeking to boost spending higher than the $967 billion sequestration level that goes into effect early in 2014. And while GOP hawks have derided the sequester cuts, others in the party are happy with the lower spending levels.

Cole, meanwhile, said that he thought both parties wanted to deal with sequestration – and that meant that the GOP needed to be ready to consider trading new government revenues for entitlement savings.

One potential way to wring out new revenues, Cole said, was to examine the carried interest tax break – which allows hedge fund managers to pay a lower rate – as part of budget discussions. 

Other potential revenue-raisers the Oklahoma Republican discussed this week – like increased oil-and-gas exploration and allowing companies to bring back offshore profits at a lower rate – would be less popular among Democrats. 

"They can get revenue," Cole told reporters on Wednesday. "They’re not going to get tax increases."

Still, Cole also acknowledged that his ideas would make some fellow Republicans uncomfortable, and pushed him beyond GOP orthodoxy on tax policy.

Many Republicans – like Ryan – say they’ll only agree to raising revenues through an overhaul of the tax code that sparks economic growth, using so-called “dynamic” scoring to estimate the economic impact. 

Most of them have also signed the anti-tax pledge administered by Grover Norquist’s Americans for Tax Reform, which says that the elimination of tax credits and deductions needs to be offset elsewhere.

Democrats, meanwhile, generally dismiss dynamic scoring, which also isn’t a part of official Congressional Budget Office scores.

Cole, a member of the Appropriations panel, is the only one of the four House GOP conferees to not sit on the tax-writing Ways and Means Committee.

Republicans on that panel have set an aggressive goal for cutting rates in tax reform, and would need to rely on the scrapping of tax breaks to make up for the lost revenue.

Ways and Means Committee Chairman Dave Camp (R-Mich.), for instance, has rolled out tax reform proposals that include the repatriation of offshore corporate income.