Sen. Chuck Schumer said today he is all for tax reform, but only if it helps pay down the burgeoning federal deficit and protects the middle class from tax hikes.
That means, he said, the rich and the investor class can't get the tax breaks that Republicans are demanding.
“These promises of lower rates amount to little more than happy talk when the math behind them doesn’t add up. And the risk for serious policymakers is, if upfront rate cuts are the starting point for negotiations on tax reform, it will box us in on what else we can achieve,” Schumer said.
“Certain conservatives will pocket the rate reductions and never follow through on finding enough revenue elsewhere in the code to reduce the deficit. Or, if they do, it will almost certainly come out of the pockets of middle-income earners,” he said.
“This is the trap of tax reform, and we must not fall for it. It is an alluring prospect to cut taxes on the wealthiest people and somehow still reduce the deficit. But you can’t have your cake and eat it, too.”
Schumer, New York's senior senator and third ranking Democrat in the Senate, delivered that message in a policy speech today at the National Press Club - and predictably stirred up attacks from Senate Republicans.
“Sen. Schumer is now the second member of the Senate Democrat leadership to endorse ‘Thelma and Louise economics.’ Senior Democrats are now openly acknowledging their plan to hold the economy hostage to massive, job-killing tax hikes, and espousing the fiscally irresponsible view that says the country should be driven off the fiscal cliff rather than Congress working toward bipartisan solutions to reform and strengthen entitlements without killing jobs," said Senate Minority Leader Mitch McConnell (R-Ky.) in an email.
Congress faces a tough task after the Nov. 6 election and before the end of the year. It must decide whether to let the Bush tax cuts expire for either those making $250,000 or more, or for everyone. And it must figure out a way to cut spending to avoid an automatic cut to Defense and domestic budgets of $1.2 trillion in a "sequester" aimed to make Congress act.
Several groups, including the presidentially appointed Simpson Bowles Commission and a congressional Group of Six or Group of Eight have sought to come to terms with these tasks. But Schumer in is speech today rejected the framework that each of them begin with: a tax reform that will lower and broaden the tax base, using the savings to pay down lower rates for the upper bracket.
This framework is based on the historic 1986 tax deal between President Ronald Reagan and Democrats, he said. But things have changed: Reagan didn't face a massive deficit, and he also didn't face a looming income inequality that has the middle class on its heels.
“The reality is, any path forward on tax reform that promises to cut rates will end up either failing to reduce the deficit or failing to protect the middle class from a net tax increase. You can, at most, achieve two of these goals,” said Schumer.
“In 1986, we chose to cut the top rate and protected the middle class. We didn’t seek to reduce the deficit. Simpson-Bowles seeks to cut the top rate and reduce the deficit, but doesn’t seek to shield the middle class from a net tax increase.
“We need a third approach that prioritizes reducing the deficit and protecting the middle class, and forgoes a reduction in the top rate. That’s what I am proposing today.”
White House issues supportive statement in Wall Street Journal story.
“We think he’s making the important point here that the wealthiest must pay their fair share in any balanced approach to reducing our deficit in a way that protects the middle class, seniors and our ability to invest in education and innovation,” a White House official said. “And he’s making the argument that you can’t lower the rates for the richest like the Republicans are proposing to do without blowing a hole in our deficit or placing the burden squarely on the middle class.”