Budget talks open with tax fight

The budget conference committee met for the first time on Wednesday, and its leaders immediately clashed over the old issue of taxes.

Senate Budget Committee Chairwoman Patty Murray (D-Wash.) said Republicans must agree to close “tax loopholes” as part of any deal to replace automatic spending cuts known as the sequester.

House Budget Committee Chairman Paul Ryan (R-Wis.) responded, “if this conference becomes an argument about taxes, we’re not going to get anywhere.”

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Negotiators ended their day by deciding to get together again on Nov. 13, when they will have a month left to reach a deal by a Dec. 13 deadline.

The clash between Ryan and Murray, and the lack of urgency suggested by the decision to not meet until after a congressional recess, could justify outside expectations that the conference committee members are unlikely to reach a deal on their own.

Murray insisted she’s willing to agree to some “tough spending cuts” that, unlike the sequester, which would end in 2022, would be “permanently locked into law.”

But she said a compromise would have to run both ways, meaning Republicans would have to give ground on higher taxes.

“While we scour programs to find responsible savings, Republicans are also going to have to work with us to scour the bloated tax code and close some wasteful tax loopholes and special interest subsidies,” she said. “Because it is unfair and unacceptable to ask seniors and families to bear this burden alone.”

Ryan said tax hikes are a nonstarter for his side.

“The way to raise revenue is to grow the economy. We need to write a tax code that encourages economic growth, not stifles it,” he said. 

In a sign of the pressure facing Murray, House Minority Leader Nancy Pelosi (D-Calif.) also said a deal would have to include new tax revenue to pass muster with her caucus.

She said she would not agree to any entitlement cuts without an agreement from Republicans to raise taxes.

“Our position is that we’re going to the table in order to reduce the deficit, grow the economy, create jobs, end the sequester. Revenue needs to be on the table,” Pelosi said during her weekly news conference in the Capitol.  

“You can’t just take a piece here [and] a piece there; it has to be comprehensive,” she added. “And if you’re not going to have revenue, who’s going to pay? Granny on Medicare? That’s not something we can accept.”

Ryan said the conference committee should encourage talks between the House Ways and Means and Senate Finance committees to focus on tax reform that could end special tax breaks.

“Today, our tax code is full of carve-outs and kickbacks. We need to get rid of them, and those bipartisan talks are just the way to do it. So let’s do all we can to encourage that effort,” Ryan said. 

But he repeated the Republican argument that tax reform should not be used to add revenue for the government, and he said the conference committee should focus on smarter spending cuts than the sequester.

He described new taxes as unachievable, saying, “So let’s focus on achievable goals.”

House Budget Committee ranking member Chris Van Hollen (D-Md.) faulted Ryan, saying, “We should not start the negotiation by taking things off the table.”

He also said passing an immigration bill would cut the long-term deficit and called on the committee to make that one of its objectives.

In another sign of deep divisions within the conference, Senate Budget Committee ranking member Jeff Sessions (R-Ala.) urged members to keep the sequester-level spending and not to ignore ObamaCare, the issue that led to a 16-day government shutdown this month.

“Tax, spend, regulate, and debt will never work. It’s a plan guaranteed to fail,” he said.

There were some signs that wiggle room on revenue could be found in the end.

Rep. Tom Cole (Okla.), another of the four House GOP negotiators, has suggested the conference could find some agreement on ways to raise revenue that are generally supported by Republicans — like repatriation or expanded oil and gas drilling.

But Cole has been more coy about whether he’d be willing to cut tax breaks, like the carried interest preference relied upon by hedge fund managers — the sort of provision that Democrats would want to target in a deal to roll back the sequester.

“I’m not sure I want to be clear on the revenue side,” Cole told reporters after the meeting.

From the Senate side, Sen. Ron Wyden (D-Ore.) said that the revenue impasse could be solved by going after some tax gimmicks in the budget conference and encouraging “pro-growth” tax reform through the Ways and Means and Finance committees. 

“We can close loopholes without jeopardizing the goal of comprehensive tax reform,” he said.

Bernie Becker and Mike Lillis contributed to this report.