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White House Rejects GOP Fiscal Cliff Offer

by Mike Godfrey, Tax-News.com, Washington

06 December 2012


United States House of Representatives Republican leaders wrote on December 3, 2012 to President Barack Obama making their compromise offer of increased tax revenue and spending cuts as a framework to resolve the problems posed by the "fiscal cliff", but it was refused immediately by the White House.

The letter was written in reply to the offer from the Administration, which was presented to House Speaker John Boehner (R – Ohio) on November 29 by Timothy Geithner, the Treasury Secretary, and which involved a plan to raise USD1.6 trillion of revenue (including USD1 trillion from high-income taxpayers), and USD400bn in savings from Medicare and other social programs, over 10 years.

However, most of the increased tax revenue would be obtained by not renewing the Bush tax cuts for those earning over USD250,000; a measure which is rejected by Republicans. The Administration’s spending savings would also need to be worked out next year, with no guarantees of success, while they could also be offset by other spending increases, including an extension of unemployment insurance.

Boehner called that offer "not serious," while the Ranking Member of the Senate Finance Committee Orrin Hatch (R – Utah) called the President’s proposal "a classic bait and switch on the American people - a tax increase double the size of what he campaigned on, billions of dollars in new stimulus spending."

On the other hand, the Republican House leaders pointed out that their offer harked back to the recommendations on November 1 last year of the President’s Joint Select Committee led by Erskine Bowles, which recommended a balanced package that included significant spending cuts as well as USD800bn in new revenue.

The latter would not, according to the Republicans, "be achieved through higher tax rates, which we continue to oppose and will not agree to in order to protect small businesses and our economy. Instead, new revenue would be generated through pro-growth tax reform that closes special-interest loopholes and deductions while lowering rates."

On the spending side, they also accepted the Bowles recommendation to make additional cuts of more than USD900bn in mandatory spending and another USD300bn in discretionary spending. Those reductions would be over and above those enacted in the Budget Control Act of 2011.

"This is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require fundamental entitlement reform," they added. "Indeed, the Bowles plan is exactly the kind of imperfect, but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs. We believe it warrants immediate consideration."

In the event, the Republican offer was given as little consideration by the White House, as had the President’s proposal by the Republicans. "The Republican letter released today does not meet the test of balance. In fact, it actually promises to lower rates for the wealthy and sticks the middle class with the bill," White House Communications Director Dan Pfeiffer said in a statement.

"Their plan includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve," he concluded. "Independent analysts who have looked at plans like this one have concluded that middle class taxes will have to go up to pay for lower rates for millionaires and billionaires."

Re-confirming the President’s constant reiteration that he will not sign an extension of the high-end Bush tax cuts, as he remains unconvinced that sufficient revenue can be found from closing some or all of the tax deductions, exemptions and credits that are still available for those earning higher incomes, Pfeiffer confirmed that, in the White House’s opinion, "until the Republicans in Congress are willing to get serious about asking the wealthiest to pay slightly higher tax rates, we won’t be able to achieve a significant, balanced approach to reduce our deficit our nation needs."

TAGS: tax | small business | business | tax credits | health care | tax rates | United States | tax breaks | tax reform | individual income tax

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