U.S. Republican legislators expressed a preference to raise federal tax revenue through limiting deductions rather than raising rates to avert the so- called fiscal cliff, as Democrats pushed for higher rates on upper-income earners.
“I would be very much opposed to raising tax rates, but I do believe that we can close a lot of loopholes,” including limits on how much people can deduct for charitable giving and home mortgage interest payments, U.S. Sen. John McCain, R-Ariz., said on “Fox News Sunday.”
U.S. Sen. Richard Durbin, D-Ill., the second-ranking Democrat in the chamber, said any deal to reduce budget deficits should include tax increases on the wealthy.
“Let the rates go up to 39 percent. Let us also take a look at the deductions. Let’s make sure that revenue is an integral part of deficit reduction,” Durbin said on ABC’s “This Week.”
Democratic President Barack Obama and congressional leaders are trying to find a compromise in the next few weeks to avert the fiscal cliff, which would trigger $607 billion in tax increases and spending cuts beginning in January.
The Congressional Budget Office has said a failure to avoid the fiscal cliff could lead to a recession and a jobless rate of about 9%, compared with the October rate of 7.9%.
Federal Reserve Chairman Ben S. Bernanke said Nov. 20 that a failure to avoid the fiscal cliff would pose a “substantial threat” to the economic recovery.
Business leaders have warned that the fiscal cliff creates uncertainty for consumers and employers.
Americans “are looking for clarity so that they can make the decisions” about spending, John Sweeney, executive vice president of planning and advisory services at Fidelity Investments, said on Fox.
“There’s a great uncertainty that’s just hanging over the entire economy because we’re not confident” that Congress “can govern anymore,” David Cote, CEO of Honeywell International Inc., said on NBC’s “Meet the Press.”
The spending cuts are evenly divided between domestic and military spending. The tax cuts, enacted under President George W. Bush in 2001 and 2003, expire at the end of the year.
U.S. stocks had their biggest rally since June last week amid optimism that Obama and Republicans can reach a deal.
The markets “should be optimistic, because we can solve this problem,” Durbin said.
Obama won re-election Nov. 6 on a platform that included higher rates for wealthier taxpayers. Obama wants to extend the Bush-era tax cuts for most taxpayers, while letting them expire for individual income of more than $200,000 a year and married couples’ income over $250,000.
The Democratic-controlled Senate in July passed a bill containing those provisions. The Republican-led House opposes it.
“It’s a bipartisan bill the House should pass to make sure that we go forward with these negotiations without this specter of tax increases for working families,” Durbin said.
Republicans, who also lost ground in the Senate and House in the elections, generally support extending the Bush-era tax cuts for all income levels. They say Obama needs to show more leadership on curbing spending including on entitlement programs.
Even as Republicans oppose raising tax rates, some have distanced themselves from a pledge they made with the group Americans for Tax Reform to oppose all tax increases and to use any revenue from limiting tax breaks to reduce tax rates.
“Everything should be on the table” and “we should not be taking ironclad positions,” Representative Peter King, a New York Republican, said on NBC’s “Meet the Press.”
U.S. Sen. Lindsay Graham, R-S.C., said on the ABC program that he “will violate the pledge, long story short, for the good of the country, only if Democrats will do entitlement reform.”
“I care more about my country that I do about a 20-year- old pledge,” U.S. Sen. Saxby Chambliss, aR-Ga., seeking a bipartisan deficit reduction plan, told a Georgia television station on Nov. 21.