The pragmatic approach to a reasonable agreement to raise the debt ceiling and start reducing the federal deficit would include a mix of spending cuts and revenue increases. Yet Republican leaders in Congress refuse to consider raising any revenue. They cynically label as tax increases any attempt to let temporary tax cuts expire, end outdated subsidies or close tax loopholes. More thoughtful Republicans have to step up and look beyond such simplistic ultimatums. • By sticking to labels and avoiding specifics, the Republican leadership in Washington is creating gridlock and defending the indefensible. With their insistence that no deal include additional revenue, here are four tax breaks they are protecting that should be eliminated:
Bush tax cuts for the wealthy. President Barack Obama wants to end the Bush-era tax cuts for couples that earn more than $250,000 a year — about 2 percent of the nation's households. That should have happened at the end of last year, but the president unfortunately agreed to a two-year extension as part of a larger tax deal that included more defensible provisions such as an extension of unemployment benefits and a temporary cut in the Social Security payroll tax. Savings over a decade for ending the Bush tax cut for those top wage earners after 2012: $700 billion.
Tax breaks for private jets. Obama wants to lengthen the time over which corporations deduct the cost of their private jets from five years to seven years. That would match the schedule the airlines follow for deducting the cost of commercial airliners. Critics complain Democrats are engaging demagoguery by highlighting this issue because the money involved is relatively little. But there is nothing unreasonable about this. Savings over a decade: $3 billion.
Oil and gas credits. These include a deduction for production expenses, and Obama has been pushing to eliminate them since he took office. Savings over a decade: $41 billion.
Taxes on fees earned by investment fund managers. This would affect primarily highly paid managers of hedge funds and private equity investment companies who make as much as 20 percent on profits they generate. They usually pay a capital gains tax of up to 15 percent on their fees, and Obama wants their fees taxed as regular income with a maximum rate of 35 percent. Savings over a decade: $21 billion.
Combined, resolving these four tax issues would raise $765 billion. That's relatively modest compared to the $4 trillion in spending cuts and additional revenue it would take to make a real dent in reducing the deficit. But if Republicans won't discuss these sorts of changes, there is little hope for sweeping tax reform that would raise revenue, wipe out popular income tax deductions and lower tax rates.
Don't be fooled by the simplistic rhetoric. The stalemate in Washington is not about protecting the middle class from tax increases. It's about Republicans appealing to the most extreme elements of their political base and protecting the affluent, big oil and gas companies — and the owners of private jets.