Tax issue is over, GOP leader says

Close ‘loopholes,’ Democrats say

Senate Republican leader Mitch McConnell made clear Sunday that he would oppose any effort by the Obama administration to increase tax revenue beyond the higher rates for top earners in the recent fiscal deal.
Senate Republican leader Mitch McConnell made clear Sunday that he would oppose any effort by the Obama administration to increase tax revenue beyond the higher rates for top earners in the recent fiscal deal.

— Senate Republican leader Mitch McConnell made clear Sunday that he would oppose any effort by the Obama administration to increase tax revenue beyond the higher rates for top earners in the recent fiscal deal, saying he remained focused on finding ways to cut spending as the government grapples with debilitating debt.

“The tax issue is finished. Over. Completed. That’s behind us,” McConnell, of Kentucky, said on the ABC program This Week.

Just days before McConnell’s appearance on three Sunday morning news programs, he and Vice President Joe Biden helped broker a resolution to the latest fiscal crisis, but Washington was already bracing for a series of further confrontations over debt and spending.

By late February or early March, the Treasury Department will run out of options to cover the nation’s debts and could begin defaulting on government loans unless Congress raises the legal borrowing limit, or debt ceiling. Economists warn that a default could trigger a global recession.

Also looming are deep automatic spending cuts expected to take effect at the beginning of March that could further erase fragile gains in the U.S. economy. Then on March 27, the temporary measure that funds government activities expires, and congressional approval will be needed to keep the government running.

McConnell’s stance on taxes seemed to conflict with calls from Democrats, and even some House Republicans, to revamp the tax code to raise new revenue. McConnell said he would favor change only if it was “revenue neutral,” meaning that any new tax revenue would be matched by spending cuts.

Democrats said further tax increases for the wealthiest Americans were still possible as Congress looks to close the gap between revenue and expenditures. Democrats point out that President Barack Obama has already agreed to significant spending cuts, and that the latest deal only gets the nation to about half of the revenue it needs to resolve the red ink.

“Trust me, there are plenty of things within that tax code - these loopholes where people can park their money in some island offshore and not pay taxes. These are things that need to be closed. We can do that and use the money to reduce the deficit,” said Dick Durbin of Illinois, the second ranking Senate Democrat.

House Democratic leader Nancy Pelosi of California said she, too, wants to put “everything on the table from the standpoint of closing loopholes.”

But McConnell’s focus on the need for serious spending cuts was relentless in his appearances on ABC, NBC and CBS. He was equally insistent that Obama must lead on the matter.

“We don’t have this problem because we tax too little; we have it because we spend too much,” McConnell said.

His spending-only stance stood in contrast to comments from Durbin, who said on the CNN program State of the Union that there was still plenty of room to increase revenue by closely examining “deductions, credits, special treatments under the tax code.”

McConnell’s position also contrasted with remarks Saturday by Obama, who said in his weekly address that he remained open to both spending cuts and further tax increases after the fiscal agreement last week, which made many tax cuts permanent for most households and put off big government spending cuts.

Obama, who spoke from Hawaii before returning Sunday to Washington, emphasized his own line in the sand. Now that the government has reached its statutory borrowing limit, Obama said that Congress had no choice but to raise the limit before late next month to avoid a damaging default. He said the matter was not up for negotiation.

McConnell, asked whether he supported those Republican senators who have suggested that a default, and even a brief government shutdown, might be necessary to secure deep spending cuts, said on NBC that it was a “shame we have to use whatever leverage we have” to get the president’s attention.

“My answer is: Hopefully we don’t need to get to that point,” he said when asked about it on ABC. “The president surely must know we’re spending way too much. So why don’t we do something about reducing spending?”

Sen. Lindsey Graham, RS.C., didn’t dismiss the idea of allowing a partial shutdown of government until an agreement can be reached. Texas Sen. John Cornyn and other Republicans have floated the idea of a shutdown as a way of winning deeper spending cuts.

“I believe we need to raise the debt ceiling, but if we don’t raise it without a plan to get out of debt, all of us should be fired,” Graham said.

Maryland Rep. Chris Van Hollen, the top Democrat on the House Budget Committee, said the Republican strategy amounted to: “Give us what we want ... or we’re going to tank the United States economy.”

McConnell on Sunday also suggested that other Obama administration priorities - including a new push for gun restrictions in the wake of a Connecticut school shooting in which 26 people were killed - might have to wait until the debt issue was resolved.

Asked about reports that Biden, named by Obama to develop proposals to address gun violence, was confidently predicting passage of gun control legislation this month, McConnell cast cold water on the notion.

“The biggest problem we have at the moment is spending and debt,” he said. “That’s going to dominate the Congress between now and the end of March. None of these issues, I think, will have the kind of priority that spending and debt will have.” Information for this article was contributed by Brian Knowlton of The New York Times and by Anne Flaherty of The Associated Press.

Front Section, Pages 1 on 01/07/2013

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