WASHINGTON (Reuters) - In a sign of possible progress in bipartisan U.S. deficit talks, Republicans seem more flexible on corporate taxes, a change that could help the congressional “super committee” chart the country’s path back to fiscal health.
Lobbyists familiar with the deficit negotiations said Republicans on the panel may consider closing some of the myriad income tax loopholes in exchange for reducing the tax rate for corporations.
That could shift Republicans away from a longstanding position that tax reform take both corporate and individual taxpayers into account. But reforming both is likely too ambitious given the super committee’s November 23 deadline.
It could also help the panel move toward an overall agreement to slash big budget deficits by a November deadline.
Lobbyists with access to super committee members and their staffs said Republicans on the panel expressed the positions during a meeting on revenue issues last week.
Lobbyists and analysts say the six Democrats and six Republicans who make up the super committee need to agree on taxes before they can tackle the politically sensitive issues of Medicare and Medicaid, the huge government healthcare programs for the elderly and poor.
Democrats have already left open the door to lowering the corporate tax rate, and Republican willingness to move forward on corporate taxes alone could lead to a deal that also closes loopholes and cuts some healthcare administrative costs.
Among tax loopholes President Barack Obama wants to close are breaks for corporate jets and favorable treatment for the oil and gas industry.
The super committee has been working for five weeks trying to find ways to shrink the country’s federal deficit, which hit $1.3 trillion for the fiscal year that ended on September 30.
They must reach a deal by November 23 to cut $1.2 trillion over the next decade or automatic budget cuts will be triggered starting in 2013 that would cut funding to selected agencies and programs across the board and hit defense spending hard.
The super committee was created in August after a rancorous debate over raising the U.S. borrowing limit, which prompted Standard & Poor’s to cut the U.S. government’s AAA credit rating by one notch. Other agencies could take similar steps if the panel fails to come through with a big enough deal.
Although super committee members have discussed the politically sensitive topic of revenues and tried to gauge the lay of the land on healthcare topics, they are starting to get concerned over the slow pace.
Congressional and industry sources said members have told their leaders in the House of Representatives and the Senate that the only progress they have made is that they are actually talking to each other instead of “pontificating.”
“Members are frustrated,” one source said, because “the pace is too slow and time is ticking.”
A lobbyist for a healthcare trade association said: “Committee staff say: ‘Don’t expect anything. They don’t have their act together.’ But you don’t know how much is smoke screen. Leadership may be trying to manage expectations.”
One idea that the committee is mulling is some kind of an enforcement mechanism to make sure that Congress overhauls the tax code after the super committee unveils its spending cuts.
That could come in the form of instructions to the tax-writing House Ways and Means Committee and Senate Finance Committee to tackle broad tax reform next year. But it is unclear how the super committee could force action by them.
The Obama administration has already proposed $3.6 trillion in savings over the next decade, the bulk of which would be achieved by raising taxes on the rich. Some $866 billion in savings would come from allowing President George W. Bush’s tax cuts for individuals making more than $200,000 to expire at the end of next year.
Many lobbyists assume that the super committee could end up finding several hundred billion dollars in savings, with the rest of the $1.2 trillion in mandated savings being handled by automatic spending cuts.
Lobbyists say discussions about general concepts have tended to run aground on specifics.
“It’s like a sincere New Year’s Eve resolution that they’re going to quit smoking. You do get that level of sincerity. But that doesn’t mean they can pull it off and they seem to be pushing off the hard questions,” said John Jonas, a healthcare lobbyist with the legal firm Patton Boggs.
Representatives of the healthcare sector generally would like to see the committee deadlock, because automatic cuts would spare Medicaid and impose only modest reductions on Medicare.
Editing by Jackie Frank