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Republicans Pull Out Of US Debt Talks Over Taxes

by Mike Godfrey, Tax-News.com, Washington

27 June 2011


The United States House of Representatives’ Majority Leader, Eric Cantor, and Senate Minority Whip, Jon Kyl, two Republicans who have been talking with Vice President Joe Biden and Democrat members of Congress on an increase to the country’s debt limit, have confirmed that they will no longer attend those negotiations.

The talks follow confirmation from Treasury Secretary Timothy Geithner last month that the public debt limit had been reached, but that, with the extraordinary actions now being taken by the Treasury, the borrowing authority would be able to be extended until the beginning of August, at which date the US government would have to shut down.

Since then leading Republican politicians have remained insistent that, at the same time as an agreement to increase the debt limit, there is an opportunity to approve further measures to contain the fiscal deficit through reduced government spending, but not by increased taxes.

On the other hand, Democrats, while agreeing to certain reductions in spending, have pointed, for example, to the significant tax breaks currently being provided to the oil sector as a possible area of increased revenues, while the Democrat-controlled Senate has also recently passed a bill to cancel ethanol tax credits.

It is now evident that an impasse has been reached between the two sides on the Democrat demands for tax revenue increases as part of any deal, and Cantor has intimated that it can only be resolved at a higher level - by the two leaders, President Barack Obama and the House Speaker John Boehner, in a face-to-face confrontation.

Boehner has indicated that he is willing to attend debt limit talks, but, at a press conference, has reiterated that “job-crushing tax hikes are off the table” and that the government needs to “stop spending money we don’t have.”

“First of all: raising taxes is going to destroy jobs,” he said. “If you raise taxes on the people that we need to grow our economy and to hire new workers, guess what: they’re not going to do it if they have to pay higher taxes to the federal government. Second, a tax hike cannot pass the House of Representatives. It’s not just a bad idea, it doesn’t have the votes and it can’t happen.”

TAGS: tax | economics | fiscal policy | tax credits | United States | tax breaks

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