Opposition waver on Obama tax plan

Opposition waver on Obama tax plan

Barack Obama and House of Representatives speaker John Boehner met at the White House amid talks to avert America’s impending “fiscal cliff” as a growing number of Republicans in Congress appeared to be veering towards accepting the president’s demand that the wealthy must pay more tax.

Yesterday’s meeting was the first between just the two leaders since election day on November 6.

Spokesmen for both men said they agreed to not release details of the conversation, but emphasise that the lines of communication remained open.

The meeting comes as the White House and Congress try to break an impasse over finding a way to avert the fiscal cliff, a combination of automatic tax increases and spending cuts due to kick in at the beginning of next year.

Mr Obama met Republican Mr Boehner in November as well as Senate majority leader Harry Reid and House minority leader Nancy Pelosi. The president spoke separately by telephone with Mr Reid and in person with Ms Pelosi on Friday.

The president has been pushing for higher tax rates on the wealthiest Americans as one way to reduce the deficit – a position Mr Boehner and other House Republicans have steadfastly opposed.

Republicans are demanding steeper cuts in costly entitlement programmes like government health insurance and pension payments for older people.

But one Republican senator said Senate Republicans would probably agree to higher tax rates on the wealthiest Americans if it meant getting a chance to overhaul entitlement programmes.

Tennessee’s Bob Corker said he spoke for many Republicans who realised that Mr Obama holds the stronger hand on increasing taxes on the wealthy in the debate about how to avoid sending the US economy over the fiscal cliff.

Many economists and the non-partisan Congressional Budget Office predict that failure to solve the political stand-off would push the fragile American economy back into recession.

The fiscal cliff faces the country because tax rate cuts that were put in place during George Bush’s administration expire at the end of the year.

Mr Obama campaigned during his successful run for a second term on keeping the cuts in place for all but the top two per cent of American earners. Republicans want to find additional government income by cutting back on tax loopholes and deductions while leaving the tax rates unchanged.

The pending across-the-board reductions in government spending, affecting everything from social programmes to the military, were put in place last year as an incentive to both parties to find spending reductions to begin cutting government red tape.

That legislation grew out of the two parties’ inability last year to agree to a tax and spending programme that would have taken a big bite out of the deficit.

Compounding the likely devastating effects of failure to agree on a means of avoiding the fiscal cliff will be the coincidental expiration of extended government benefits for the long-term unemployed.

The remarks by Mr Corker, who is building a reputation as a pragmatic deal maker among fiscally conservative Republicans, and support among a growing number of colleagues in Congress, put fresh pressure on Mr Boehner and others in the Republican caucus to rethink their long-held assertion that even the very rich should not see their tax go up next year.

Republican leaders have argued that the revenue gained by increasing the top two tax rates will do little to reduce the government budget deficit and would only harm job creation.

But Mr Corker says insisting on that red line – especially since Mr Obama won re-election after campaigning on raising tax rates on the wealthy – might not be wise.

“There is a growing group of folks looking at this and realising that we don’t have a lot of cards as it relates to the tax issue before year end,” he said.

If Republicans agree to Mr Obama’s plan to increase rates on the top 2% of Americans, Mr Corker said, “the focus then shifts to entitlements and maybe it puts us in a place where we actually can do something that really saves the nation”.

Among those moving towards agreeing higher tax rates for the wealthy is Republican congressman Tom Cole of Oklahoma and Oklahoma Republican senator Tom Coburn has already has said he could support the plan as part of a comprehensive plan to cut the national deficit.

“Will I accept a tax increase as a part of a deal to actually solve our problems? Yes,” Mr Coburn said. “But the president’s negotiating with the wrong people. He needs to be negotiating with our bondholders in China, because if we don’t put a credible plan on the discussion, ultimately, we all lose.”

But hardline fiscal conservatives in the House of Representatives were holding fast to their position.

“No Republican wants to vote for a rate tax increase,” said Jeb Hensarling of Texas, chairman of the House Republican Conference.

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