‘Fiscal Cliff’ Talks: Tax Increases Seem Inevitable

Dec 7, 2012 11:51am

Another week comes to a close with seemingly little progress in the on-going “fiscal cliff” negotiations. With only 24 days left to negotiate and the House of Representatives heading out of town for a long weekend, the outlook for a deal before December 31 is looking increasingly slim, and Republicans and Democrats don’t appear to be moving away from the right and the left and toward some middle ground.

But this week, several Republicans seemed to voice a sense of inevitability on a key issue in cliff negotiations–an increase in tax rates. While Republicans continue to be staunchly opposed to raising tax rates–one of the major sticking points in the discussions–GOP House and Senate members this week shared their belief that a hike in rates is going to happen.

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“We have no leverage on that, so whether we want taxes to go up or not they’re going to,” Oklahoma Republican Sen. Tom Coburn told ABC’s Jonathan Karl on Thursday. “We can’t stop that from happening. But the real elephant in the room is entitlements.”

“The sense was that there’s a growing number of folks in our party that are saying, you know what, the president has won this round relative to the rates, but we need to you to sit down and get the second half of the deal and that’s the spending,” Ohio Republican Congressman Steve LaTourette said on CNN’s “Starting Point with Soledad O’Brien.

LaTourette’s office did not immediately respond to ABC’s inquiry for a follow-up statement.

The reason for this sense of inevitability, which both LaTourette and Coburn made clear were not to be confused with a desire to raise taxes, is in large part simply a factor of time. On January 1, if a deal has not been reached, the combination of expiring Bush-era tax cuts and Obama era-tax cuts will yield an increase in tax rates. Taxes are expected to rise by more than $500 billion if this occurs–an average of about $3,500 per household, according to calculations by the Tax Policy Center. And this week the Obama administration expressed a willingness to pass that deadline and go over the cliff if Republicans don’t agree to raising tax rates on top earners.

“Oh, absolutely,” Treasury Secretary Tim Geithner said in an interview on CNBC when asked if the administration was willing to accept the impending tax increases and spending cuts. “There’s no prospect for an agreement that doesn’t involve those rates going up on the top 2 percent of the wealthiest.”

It’s unclear how this reality will figure into the negotiations. Republicans and Democrats are both walking a tight rope in the negotiations, but polling indicates that Republicans are likely to bear the brunt of the blame if the country goes over the cliff.  A newly released Washington Post/Pew Poll found that 53 percent of those surveyed said that they would point the finger at Republicans if Congress and the administration fail to reach a deal, while just 27 percent would blame President Obama.

“A slew of polls have made it abundantly obvious that Republicans will take a big political hit if the country goes off the political cliff,” says Larry Sabato, director of the University of Virginia Center for Politics. “Yes, that won’t affect loads of GOP incumbents, but it WILL affect some, a couple dozen in more moderate states and swing districts. Plus, it influences Republican chances to make progress in the Senate in 2014.”

Despite the seemingly bleak outlook right now though, Sabato notes that the timing is actually favorable right now for both party’s to strike an agreement.

“The underlying conditions are not bad for a deal. The next election is two years away, and the president’s preferences on tax rates received something of a mandate in November,” Sabato said. ”Everyone can see the outlines of a reasonable compromise. The rates for wealthier Americans go up but not by as much as Obama wants. The Republicans acquiesce–though they let their base see that they are being dragged kicking and screaming to the rate increase. In exchange, they get some entitlement reform and spending reductions.”

 

 

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