POLITICO Pro Republicans dismayed by Obama tax ideas Coming together on big reform elusive

Remember tax reform being an area where Republicans and the White House could come together after the bruising Democrats got in the midterms?

Never mind.


The White House previewed the tax messaging coming in the State of the Union on Tuesday — heavy on tax breaks for children and middle-class families, paid for by steeper taxes on investments, cutting a loophole benefiting the über-wealthy and a new fee on big banks.

Republicans did not see it as an olive branch.

“Slapping American small businesses, savers and investors with more tax hikes only negates the benefits of the tax policies that have been successful in helping to expand the economy, promote savings, and create jobs,” Sen. Orrin Hatch (R-Utah), the new chairman of the Senate Finance Committee, said in a statement.

Absent in the highlights provided by White House officials is one big area the parties agree on — a cut in the corporate tax rate.

President Barack Obama could still announce a detailed tax reform proposal, plans for negotiations with Congress and a deadline to get it done. But tax watchers are prepared to be disappointed.

“It is hard to predict what will be in the State of the Union because the administration has been absent from the tax reform debate; I mean really absent,” David Kautter, partner in charge of the Washington national tax practice at McGladrey, said before the White House provided tax highlights Saturday.

The package of initiatives announced Saturday contains new and expanded tax credits for the middle class, including a new tax break for two-earner families and a tripling of the child care tax credit.

Altogether, the new tax benefits for middle-class families would cost $175 billion over 10 years, according to senior administration officials — in addition to the $60 billion price tag for the proposal Obama has already announced to make the first two years of community college tuition free for many students.

The capital gains taxes and financial fees would raise $320 billion over 10 years, according to White House estimates — $210 billion from the new capital gains tax revenues and $110 billion from the bank fees. All of the proposals will be spelled out in more detail in the budget proposal Obama will submit to Congress on Feb. 2.

The White House last month said tax reform could be an area of consensus, something echoed by Senate Majority Leader Mitch McConnell (R-Ky.).

“The tax area is one area where we can get things done,” Obama said at his year-end news conference. “I think in the coming weeks leading up to the State of Union, there will be some conversations at the staff levels about what principles each side are looking at.”

But experts, including Cathy Schultz, vice president for tax policy at the National Foreign Trade Council, said those meetings haven’t happened to any substantial degree, a fact that congressional aides quietly confirm.

“Is the administration finally going to come to the Hill and have serious discussions about this?” Schultz, whose group represents major U.S. companies doing business abroad, asked before the Saturday announcement.

The plan previewed Saturday does include elements backed by Republicans, including expansions of the earned income tax credit and the child tax credit.

But Sen. Marco Rubio (R-Fla.), speaking Sunday on CBS’ “Face the Nation,” accused the president of promoting class warfare.

“This is a 20th-century outdated model the president is following,” said Rubio, a potential presidential candidate. “The notion, first of all, that in order for some people to do better, someone has to do worse is just not true. Raising taxes on people that are successful is not going to make people that are struggling more successful.”