WASHINGTON (AP) — Democrats’ new mantra in budget talks is to close tax loopholes for certain businesses, investors and professionals as a way to raise more revenue to help ease autopilot spending cuts that soon are to become more painful.
On their list: Deductions for corporations that pay executives in stock options instead of salaries, reduced tax rates for hedge fund managers and private equity advisers, avenues for escaping corporate taxes on foreign profits, and provisions that help doctors, lawyers, consultants and others who incorporate themselves avoid Medicare taxes.
Democratic budget negotiators in Congress see cutting these and other tax breaks as a politically popular way to raise revenues and ease spending cuts without further swelling the deficit. Republicans say they are open to ending some special tax breaks, but they insist the new revenue be used to lower tax rates, not to increase spending.
The dispute played out this week as the negotiators tasked with merging competing budgets written by House Republicans and Senate Democrats met for only the second time in public.
“You can’t raise taxes high enough to satisfy the appetite of Washington to spend money,” Sen. Chuck Grassley, R-Iowa, said. “Closing loopholes are very legitimate. The tax code is a mess, but closing tax loopholes to spend more is not going to have long-range good results because you get the higher level of expenditure.”
The disagreement could doom prospects for averting a second round of automatic spending cuts in January. Those negotiators already have pretty much given up hope of reaching a longer-term budget accord for reducing deficits years into the future.
Democrats are circulating a list of 12 tax breaks labeled “egregious loopholes that Republicans should either bring to the negotiating table or explain to the American people why they can’t find a single loophole to close to get a bipartisan deal.”