Republicans Offer Obama Tax Hikes For Social Security Cuts

By Lori Montgomery and Rosalind S. Helderman

A growing chorus of Republicans is urging House leaders to abandon their staunch opposition to higher tax rates for the wealthy with the aim of clearing the way for a broad deal that would also rein in the cost of federal health and retirement programs.

With less than a month before the “fiscal cliff” deadline, President Obama remains adamant about allowing tax rates to rise for the wealthiest 2 percent of taxpayers. Without such a deal, he is “absolutely” ready to go over the cliff, Treasury Secretary Timothy F. Geithner said Wednesday on CNBC.

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Many GOP centrists and some conservatives are calling on House Speaker John A. Boehner (R-Ohio) to concede on rates now, while he still has some leverage to demand something in return. Republicans are eager to win changes to fast-growing safety-net programs, such as raising the eligibility age for Medicare and applying a less-generous measure of inflation to Social Security benefits.

After Dec. 31, tax rates for most Americans, including the wealthy, are set to automatically rise, and this could cost Republicans a key bargaining chip in winning changes to entitlements.

“I and some others are advocating giving the president what he wants,” said Rep. Steven C. LaTourette (R-Ohio). But he stressed that this must be part of a package that slows federal borrowing and reduces the debt by $4 trillion to $5 trillion.

“Quite frankly, some people in this 2 percent who call me, they’re more worried about the fiscal cliff than about the rates going up a couple points. That has bigger risk for them,” said LaTourette, a close Boehner ally who is retiring in January.

Rep. Thomas J. Rooney (R-Fla.) added: “If there are truly real entitlement reforms that are going to preserve Social Security and Medicare for generations to come, it’s going to be very difficult for me to oppose” higher rates for the rich.

An agreement to raise the top tax rate above the current 35 percent would mark a major concession for a Republican Party that has made opposition to higher tax rates a touchstone for more than two decades.

The step would come on top of what was already a significant compromise for the GOP: an offer earlier this week to increase tax revenue by $800 billion over the next decade. That offer involved generating new revenue by closing loopholes and ending deductions for top earners, not by increasing rates.

Republicans are growing alarmed that they could be blamed if Washington is unable to resolve the fiscal stalemate and $500 billion in year-end spending cuts and tax increases kick in. Nearly 90 percent of U.S. households would face higher taxes, and economists warn that the economy could be jolted back into recession.

With talks between the parties apparently at a standstill, Obama called Boehner on Wednesday, their first conversation in a week, aides to both men said.

Meanwhile, Republican leaders were looking for a way out of their political bind.

One option under discussion would entail setting the top tax rate above 35 percent but below the 39.6 percent level that was in effect during the Clinton administration. That compromise could let both parties claim victory. But House Ways and Means Committee Chairman Dave Camp (R-Mich.) said he was reluctant to draft such a plan unless the White House agreed to a tax-revenue target well below the $1.6 trillion Obama has demanded over the next decade.
 

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