Fiscal cliff update: Kevin McCarthy says Republicans insist on broadening tax base

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U.S. House Republicans insist on broadening the tax base to generate revenue rather than raising rates, Representative Kevin McCarthy said, signaling no softening in the chamber's standoff with President Barack Obama.

Republicans have offered $800 billion in additional revenue over the next decade, achieved in a way that would be less damaging to the economy than higher rates, McCarthy, the third-ranking Republican in the House, said today on NBC's "Meet the Press." "The best way to get that is through closing special loopholes," the California congressman said.

The divides on tax rates and spending on entitlement programs are the key issues stalling negotiations on how to avert more than $600 billion in automatic spending cuts and tax increases scheduled to take effect in January.

House Speaker John Boehner said Dec. 7 that he had "no progress" to report and said the administration had wasted another week.

To avert the so-called fiscal cliff, McCarthy said Obama needs to stop campaigning, become more engaged in talks and work on government spending, which he called the real problem in the budget.

NEEDED CHANGES

"Get in the room and make the changes that are needed," he said.

The best strategy for Republicans might be to let the tax rates on top earners expire, Senator Bob Corker, a Tennessee Republican, said today on "Fox News Sunday." "There's a growing group of folks looking at this and realizing that we don't have a lot of cards," he said. "Go ahead and give the president this 2 percent increase and all of a sudden the shift goes back to entitlements and maybe that puts us in a place where we can do something."

If no deal is reached, Republicans will "own" the recession that will inevitably follow, Sen. Richard Durbin of Illinois, the second-ranking Democrat in the Senate, said while appearing with McCarthy on the NBC program.

Sen. Tom Coburn of Oklahoma and Rep. Jeb Hensarling of Texas, both Republicans, said on ABC's "This Week with George Stephanopoulos" that Democrats needed to accept significant changes in entitlement programs.

'ALMOST IRRELEVANT

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"This talk of taxes is almost irrelevant to the trillions and trillions of debt," said Hensarling, who will become chairman of the House Financial Services Committee in January.

Durbin said he was open to charging high-income retirees more money for Medicare to help reduce spending. He said he is less willing to consider increasing the eligibility age for Medicare to 67 from 65.

"What happens to that early retiree?" he asked. "What about that gap in coverage between their workplace and Medicare?"

Obama, who has called for higher rates on income of individuals above $200,000 and married couples above $250,000, wants $1.6 trillion in additional revenue, double what Republicans have offered. He said in a Bloomberg Television interview Dec. 4 that limits on tax breaks could generate only $300 billion to $400 billion.

ARGUMENTS' GAPS

Each side's argument on tax rates has gaps. Obama's own budget calls for more than $750 billion in revenue from top earners without raising rates, and he said last year that achieving $1.2 trillion without higher rates was possible.

Higher rates are necessary, Durbin said.

"The American people spoke on this issue in the election," he said.

Republicans, meanwhile, haven't specified which tax breaks they would limit. The costliest breaks are among the most popular, such as those for mortgage interest, charitable contributions, capital gains and employer-provided health insurance.

If Congress doesn't act by the end of the year, income taxes at all levels will go up, and the top tax rate will reach 39.6 percent, up from 35 percent now.

Automatic spending cuts, half in defense programs, will begin taking effect. The Congressional Budget Office estimates that inaction would lead to a recession in the first half of 2013.

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