House Dem rejects linking tax reform to debt-ceiling increase

Rep. Chris Van Hollen (D-Md.) on Tuesday rejected a new GOP push to link an increase in the nation’s debt ceiling to an overhaul of the tax code.

The ranking member of the House Budget Committee said House Republicans need to stop threatening to default on any of the nation’s bills unless they secure policy victories.

“The president has been very clear. There is no negotiating over whether or not the United States pays its bills or not. It’s a fundamental principle that we should not be a deadbeat nation,” Van Hollen said. 

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“If Republicans want to consider tax reform, we’ve always been open to that in the context of the budget discussions. The way to deal with that is to go to a budget conference, and right now the Speaker is blocking the budget conference committee,” he said. 

The $16.7 trillion debt ceiling will likely need to be raised by October, according to the latest analysts from budget analysts. Congress suspended the borrowing limit earlier this year, but it will come back into effect on May 19. 

So far, Speaker John Boehner (R-Ohio) has not said what the price will be for raising the debt ceiling. In 2011, he insisted on dollar-for-dollar cuts to future spending, and when President Obama refused, a crisis ensued. 

After a standoff that rattled equity markets and added to U.S. borrowing costs, both sides agreed to a complex supercommittee proposal that ultimately failed and led to the indiscriminate sequester spending cuts that are now going into effect.

In January, the debt ceiling was suspended temporarily once Democrats agreed to “No Budget, No Pay” legislation that would have withheld lawmaker pay if the House and Senate had not each passed a budget. The Senate subsequently passed a budget for the first time in four years, but so far there has been no conference to reconcile it with the House version. 

Now Boehner and other House leaders are trying to figure out what their “ask” will be on the debt ceiling.

At a meeting last Thursday, House Ways and Means Committee Chairman Dave Camp (R-Mich.) and rank-and-file members discussed whether the solution should be to tie a tax reform fast-tracking measure to an increase in the debt limit.

Rather than a full tax reform bill, the measure would likely set out a timeline for completing the first major overhaul of the complex tax code since 1986, a GOP aide said.

It is not yet clear whether the GOP would insist that the tax reform bill not raise any revenue for deficit reduction, or whether additional spending cuts would also be included.

Using all the new revenue from closing loopholes to lower tax rates is Camp’s position, but he has not yet said it will be the price for the debt ceiling.

“Some people talk about air-dropping in a full tax reform into the debt ceiling, the more likely thing is that you would agree to procedures,” a GOP aide said. "The chairman believes in revenue-neutral tax reform. He is not changing his position.”

The aide said the House is taking the threat of a bond default off the table in May by passing a bill to prioritize debt payments in the event the debt ceiling is reached. 

Senate Finance Committee Chairman Max Baucus (D-Mont.) wants to use some revenue from tax reform to lower budget deficits. Although eager for tax reform, he has not publicly endorsed tying it to the debt ceiling yet. 

Van Hollen was clear he wants the debt ceiling de-linked from other matters, however.

“I am very nervous that despite what I think are the Speaker’s good intentions to avoid a showdown, he can’t see his way to putting on the table a decent way out now, so the clock ticks,” Van Hollen said. 

The Democrat, speaking at a Bloomberg Businessweek event, said although he has problems with Obama’s 2014 budget proposal it is a place to start because it turns off the sequester cuts and closes tax loopholes. 

“Some of the other ideas in the president’s budget are more controversial and I have some concerns about them,” he said. 

He said the proposal to change to a different measure of inflation known as chained consumer price index may be flawed since it does not account for healthcare costs seniors on Social Security face.

“That conversation at least is alive on the Democratic side,” he said, in contrast to the GOP.

“They have said they will not accept one tax break loophole closure in order to reduce the deficit,” he said.

As both sides continue to ramp up jockeying over the debt ceiling, Camp plans to pursue regular order on tax reform. The Thursday listening sessions was just the first part of an ongoing process on how to proceed both on tax reform — which will involve contentious choices about ending tax breaks in order to lower tax rates — and the debt ceiling. 

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