Fiscal Cliff

US Republicans soften stance on tax rises

As the 'fiscal cliff' nears there is fresh hope of compromise but the Democrats also will face pressure for significant spending concessions

PUBLISHED : Wednesday, 28 November, 2012, 12:00am
UPDATED : Wednesday, 28 November, 2012, 6:14am


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Converting post-election Republican talk of openness to tax increases into bipartisan action could cause a fracture within the party while requiring significant spending concessions from Democrats.

As Congress returns this week to confront a so-called fiscal cliff at the end of the year, many Republicans who have long dismissed any tax increase as unacceptable now say they are willing to entertain higher revenue, provided Democrats accept cuts in entitlement programmes as part of a deficit-reduction deal.

This is particularly noticeable in the Senate, where several influential Republicans have said they were willing to renounce their past anti-tax pledges.

While the verbal openness to taxes questions the hold of anti-tax advocates on the party who have signed a pledge against tax increases, anti-tax leader Grover Norquist called the requisite deal for spending cuts "a pink unicorn".

"The new change is in how Republicans are talking about taxes, not their substantive position," said Keith Hennessey, who was an economic adviser to president George W. Bush.

"Key congressional Republicans have repeatedly indicated they are willing to agree to more revenue, and not just that which results from increased growth if, and only if, entitlements are fixed and the tax code is reformed."

The depth of potential Republican support for tax increases, and the conditions attached, will be tested over the next few weeks as legislators negotiate with President Barack Obama.

The goal is an agreement to avert automatic tax increases and spending cuts scheduled to take effect in January. Following elections that gave Obama a second term and added Democratic seats in Congress, Republicans still run the House of Representatives.

The president spoke with Republican House leader John Boehner and Democrat Senate leader Harry Reid over the weekend, according to Jay Carney, the White House press secretary.

"We remain confident that we can achieve an agreement," he said.

As their price for considering a tax increase, Republicans are demanding structural changes to entitlement programmes and an overhaul of the tax code.

They say they are waiting for Obama and congressional Democrats to make an offer on spending reductions.

Significant questions remain about what Republicans would accept. Boehner has drawn a line at increases in marginal tax rates.

At the same time, he has said he wanted to raise any additional revenue through economic growth and an overhaul of the tax code. His statements haven't specified whether he was suggesting a tax increase.

For years, the clearest distillation of the Republican position on tax increases has been a pledge written by Norquist, president of Americans for Tax Reform. Signers pledge to oppose tax-rate increases and any limits on tax breaks that aren't accompanied by equally sized tax rate cuts.

Their numbers have declined, while still a narrow majority in the Republican-run House. In the new Senate, 39 of the 100 senators had signed up.

Some pledge-signers said they were not bound any more by the pledge.

"The only thing I'm honouring is the oath that I take when I serve when I'm sworn in this January," Republican Rob Corker said yesterday.