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Boehner Was Willing to Compromise on Tax Reform, Not Tax Hikes

2:10 PM, Jul 12, 2011 • By JOHN MCCORMACK
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Fox News publishes a transcript of John Boehner's remarks to the GOP Conference today. Here's Boehner on tax reform:  

Over the past couple weeks I engaged the president in a conversation directly about the possibility of an agreement that would tackle all of these problems. This would be an agreement built on the solid work done by the Biden group, negotiated by Leader Cantor. I pushed the president to go even further, and lock arms with us and make structural reforms to all three entitlement programs. The president said he was willing to talk about it. He said he was willing to talk about reforming MedicareSocial Security, and Medicaid -- but in order to talk about that, he had a list of tax increases that would have to be a part of it.

I told the president that tax hikes were off the table, but we could talk about tax reform -- because comprehensive tax reform could generate additional revenue through economic growth. He was willing to talk about corporate tax reform. I told him we have to talk about personal AND corporate tax reform, because if you don't do both, you leave out the small businesses who often pay at the personal rate, and therefore would be at a disadvantage. He then asked for a 10-year revenue number.

I said it should be no more than 19% of GDP - about the same level as the House-passed budget. . .with fewer tax rates and a top rate less than it is today. He said he that to go there, we would have to make permanent the bottom four Bush tax rates. I said I could only talk about that if there was a guarantee that tax reform with three personal rates -- and a top rate lower than the current rate -- would be enacted by the first quarter of next year. This would guarantee the decoupling would be an irrelevant political statement because a new code would be in place before the scheduled tax hikes could take effect.

I wanted tax reform that broadens the base, simplifies the code, and lowers rates, to boost economic growth. The president could not accept that because he wanted to increase the "progressivity" of the current system. This is where things began to break down. And this is where there's been some confusion.

Let me be crystal clear on this: at no time, ever, during this discussion did I agree to let taxes go up. I haven't spent 20 years here fighting tax increases just to throw it all away in one moment. What I did do was lay out the conditions that would be necessary to make sure there would be no tax hikes. As the week went on, it became clear that the president wouldn't accept those conditions. It became clear that they weren't serious about structural reforms to the entitlement programs. It became clear that they would only do entitlement reform if it came along with tax HIKES. It became clear that their vision of tax reform was to maintain many of the current code's flawed features. That's when I walked away.

Am I angry about it? I sure as hell am. I believe we are missing a great opportunity. We all know the problems we face as a nation. We've acted with courage this year, passing a budget that begins to address them. At the White House yesterday, when the president talked about "shared sacrifices," I noted that our members weren't exactly doing cartwheels over daring to make reforms to Social Security and Medicare. The president said Republicans had already voted to do that. My response: "Well excuse us for trying to lead, Mr. President."

Tax policy is more than a little confusing, but what Boehner was willing to do on taxes was reduce or nix tax breaks--also known as itemized tax deductions and exclusions. The savings from reducing or eliminating tax breaks would facilitate lower tax rates with some revenue going toward deficit reduction.

The House-passed GOP budget tries to do about the same thing, but it would generate revenues of 18.3% of GDP, rather than 19%, and apply all savings "dollar for dollar" to further lowering tax rates. The bipartisan Simpson-Bowles plan, in contrast, sought to increase revenues to 21% of GDP, which would have facilitated the lowering of tax rates and $1 trillion toward deficit reduction.

Lowering rates would promote growth, and scaling back deductions and exclusions would be a great reform. GE might actually have to pay taxes. And even some of the most popular deductions or exclusions--mortgage home interest and health care benefits--have distorted the health care and housing markets.

Too bad Obama put "progressivity" ahead of compromise and reform.

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