Transcript: Sens. Durbin and Kyl

DURBIN: The Senate Finance Committee is considering a lot of different options. I don't want to preclude or select any option at this point. But I think what we need to do is to make sure that at the end of the day, we have real health care reform.

The American people are committed to change, George. There is resistance, of course, among some Republicans in the Senate. But this has been a good week. A number of Republican senators came forward, met with Senator Harry Reid, continued to meet with Senator Baucus.

I think we're starting the kind of bipartisan dialogue that's going to work.

STEPHANOPOULOS: I want to ask Senator Kyl about that bipartisan dialogue. But first, on this tax increase.

SEN. JON KYL (R-AZ), WHIP: No.

(LAUGHTER)

STEPHANOPOULOS: Absolutely not.

KYL: No. Here is the problem. We're in a recession. We know that between 75 and 80 percent of the jobs created in the country are created by small business. At least 55 percent of the income that would be generated by this surtax directly hits the entrepreneurs who run these small businesses.

It would be a job killer. It would be exactly the wrong thing to do any time, but especially when we're in the middle of a recession.

STEPHANOPOULOS: How about these bipartisan negotiations? Senator Charles Grassley, your ranking member on the Finance Committee, which you are also a member of, has been negotiating with Senator Baucus and others. He met with Harry Reid, as Senator Durbin just said.

But I have been told that you've had some very tough conversations with Senator Grassley and that you've warned him against giving away too much to the Democrats. Is that true?

KYL: Well, no. I haven't warned him about anything. But it is true that we've had a lot of discussions internally in our Republican Conference, and that senators Hatch and Grassley and Enzi and Olympia Snowe, who did meet with that bipartisan group, I think sent a very strong message.

No on these taxes. No on the kind of mandates that the Democrats are talking about, including a government-run insurance company. So while Republicans all...

(CROSSTALK)

KYL: George, can I just make one quick point? Republicans are very committed to reform. But we do not like the ideas of spending and taxing and creation of more deficit in order to achieve these results.

STEPHANOPOULOS: No. But Senator Grassley has talked about other tax increases, not taxing the -- taking away the exclusion for health insurance plans right now. He has also talked about a public insurance plan based on the idea of cooperatives.

On those issues, does he speak for the Republican Conference?

KYL: No. And I certainly disagree with any kind of government- run plan. I don't think it's fair to say that Senator Grassley has supported any of these tax proposals. He has been very wary of the tax proposals.

Think about this, if you have a catastrophic health event in your life, you can take -- if it represents more than 7.5 percent of your gross adjusted income, for income tax purposes, you can take a deduction on that.

They're asking to raise this up to 10 percent. Most of the people hit by that are seniors and 55 percent of them are making under $50,000 a year. These are bad tax policies.

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