Deficit commission bill will start out free of all tax deductions and loopholes, Chambliss says

Jon Ward Contributor
Font Size:

One thing is becoming clear about legislation that a bipartisan group of more than 30 senators plan to introduce later this month to implement the recommendations of President Obama’s deficit commission: the bill’s debut will be just the beginning of a protracted fight over its final result.

Information has been scarce about where the bill – spearheaded by Democrat Sen. Mark Warner of Virginia and Republican Sen. Saxby Chambliss of Georgia – will come down on matters such as tax reform, Social Security, and spending cuts. The deficit commission did not deal in depth with Medicare or Medicaid.

But in an interview Wednesday, Chambliss told The Daily Caller he wanted the legislation to start out free of all tax deductions and loopholes, the most drastic tax reform option of several that the deficit commission included in its final report.

Any deductions – such as the deductions for mortgage interest or for charitable giving, to name just two of many – would have to be added back on through an amendment that would require a separate vote by the Senate, Chambliss said.

“It will have the recommendations of the commission that all the deductions be eliminated,” Chambliss said. “And then somebody’s going to come in and want to add back the mortgage interest deduction, somebody’s going to want to add charitable deductions. So we’ll have to pick and choose as to which ones are added back, if any.”

Asked in a follow up whether this meant that the legislation would start “at zero” and then add back on through the amendment process, Chambliss answered in the affirmative. But he said he was not sure if the deduction elimination applied to corporate taxes or only personal income taxes.

Senate aides cautioned that the bill is still being drafted and subject to change. And it is just as likely, sources said, that the legislation will not come down in favor of one approach to tax reform over another and will simply require further action by the Senate.

Nonetheless, Chambliss’s comments about the way the bill will be handled made clear that the first draft will be in many ways little more than an opening kickoff in a year long game of football.

“Mark [Warner] will be first to have an amendment. I’ll be right behind him, because I’d like to change part of it. You’ll see others do the same thing who are co-sponsors of the legislation,” Chambliss said, though he declined to specify his planned amendment. “So the initial legislation will be the debt commission report but we know that at the end of the day it’s going to change.”

He also predicted this type of process for any changes to Social Security.

“Instead of waiting until 2050 I would prefer speeding up that process of raising age limits,” Chambliss said, referring to the commission’s recommendation that the retirement age be moved up to 68 in 2050. “But the commission has a time table and that’s where we’ll start.”

Chambliss made clear that despite his long record as a reliable fiscal conservative, he is willing to defy the conservative shibboleth that tax increases dare not be mentioned.

“I’ve never voted for a tax increase and hope I don’t have to ever vote for one, but I do think it’s got to be a part of the mix,” said Chambliss, who has a 93.28 percent life time rating from the American Conservative Union.

Chambliss said that he and Warner — in their discussions about the $1.5 trillion budget deficit and the $14 trillion national debt — have talked about “the difficulty that he’s going to have with his side of the aisle on reforming social security and Medicare.”

“And he knows I’m going to have difficulty on the revenue side with folks on my side.”

“By the same token we both agree that if you don’t put both those issues on the table then this is not going to work. At the end of the day, everybody’s going to have to swallow hard and everybody’s going to have to understand that they’re going to have to make some sacrifices,” Chambliss said.

The deficit commission report recommended reducing six personal income tax brackets to three, and going to a system of 8, 14 and 23 percent. If the government were to retain a certain number of tax deductions and exemptions, the report said rates could go to 12, 22 and 28 percent. The current brackets are 10,15, 25, 28, 33 and 35 percent, and are scheduled to go up to 15, 28, 31, 36 and 39.6 percent if the Bush tax cuts expire in 2013.

The report also recommends lowering the corporate tax rate to 26 or 28 percent, up from its current 35 percent rate. Groups such as the Chamber of Commerce have said they support the elimination of the many tax loophole handouts to businesses with political connections, in conjunction with lowering the corporate rate.

But a recent report by Politifact showed that 91 percent of the $2.17 trillion in tax breaks over the last fiscal years went to individuals’ personal income taxes, with the rest going to corporations. By comparison, Politifact reported, the government took in only $1.85 trillion in revenues over those two years.

Chambliss also ridiculed the president’s proposal in his State of the Union address to freeze an eighth of the federal budget for five years, which would reduce proposed spending over the next decade by $400 billion.

“When the president talks about reducing spending by $400 billion – ‘Boy this is great’ – that’s nothing,” Chambliss said. “We’re talking about in our legislation reducing spending by $4 trillion. That’s the kind of reductions that you’re going to have to see.”

But he said he is optimistic that the legislation being worked on by Warner and himself has an opportunity to succeed, if the White House gets behind it.

“I think the atmosphere in Congress right now gives us the best opportunity I’ve seen in my going on 17 years here to do something like this,” he said. “Tinkering around the edges is not going to solve the problem, and I think people on both sides of the aisle understand that. We can disagree about the direction we go, but I think everybody understands it’s going to take something major, and I think the White House understands that.”

“So I think if the White House sees that we’re serious in the Senate in a bipartisan way I think the White House will get behind it,” he said. “I think if they do that gives us a really good opportunity … to get something like this accomplished.”

Email Jon Ward and follow him on Twitter