Daily Tax Update - December 5, 2012: President Obama Continues to Court Business Support

PRESIDENT OBAMA CONTINUES TO COURT BUSINESS SUPPORT:  Today, in remarks to the Business Roundtable, President Obama said that business leaders "should not accept going through" another debt-ceiling crisis like the one in 2011.  Obama said, "[I]f you look at what’s needed in order for us to stabilize our budget, stabilize our deficit-to-GDP ratio, our debt-to-GDP ratio, then every credible economist will tell you that you can't just do it on spending cuts.  We can't cut our way to prosperity, that there’s got to be a balanced approach in which we also are bringing in new revenues -- partly because our revenue levels are as low as they’ve been in most of our lifetimes.  And what I've proposed, what I put forward in the campaign and what I think a majority of the American people agreed with -- in fact, there’s some folks who didn’t vote for me that focus groups and polls show nevertheless they agreed with my concept when it comes to deficit reduction -- is that an approach that says we're going to raise additional revenue particularly from those who have done best in the economy over the last decade, combined with some smart cuts and with entitlement reform that can strengthen our social safety net over the long term but do so in a responsible way -- that's the way to go forward.  And that's what we've put forward."  Obama continued, "The problem that we had up until fairly recently -- and this was extensively debated during the campaign -- was the belief that either, A, we could balance our budgets entirely on spending cuts, or a variation that has emerged is, is that we can do so while still lowering rates simply by closing loopholes and deductions.  And you’ve heard from my team, but let me just repeat, we don't have any objection to tax reform, tax simplification, closing loopholes, closing deductions.  But there is a bottom-line amount of revenue that is required in order for us to get a real, meaningful deficit reduction plan that hits the numbers that are required for us to stabilize our debt and deficits.  And all the math that we've done -- and we analyzed this stuff pretty carefully -- shows that it is not possible for us to raise the amount of revenue that's required for a balanced package if all you are relying on is closing deductions and loopholes.  Let me amend that.  It is possible to do, theoretically; it is not possible or wise to do as a practical matter.  . . . . What that means is, is that any formula that says we can't increase tax rates probably only yields about $300-$400 billion, realistically.  And that's well short of the amount of revenue that's needed for a balanced package.”  Obama added, “So what we've said instead is let’s allow higher rates to go up for the top 2% -- that includes all of you, yes, but not in any way that’s going to affect your spending, your lifestyles, or the economy in any significant way; let’s make sure that 98% of Americans don't see a single dime in tax increases next year, 97% of small businesses don't see a single dime in tax increases next year -- and by doing that alone we raise almost a trillion dollars without any adverse effects on the economy.  Let’s combine that, then, with some additional spending cuts and some long-term entitlement reform that can get us to a number close to $4 trillion, which stabilizes our debt and our deficits relative to GDP for at least a decade, perhaps more."  Obama added, "Now, we've seen some movement over the last several days among some Republicans.  I think there’s a recognition that maybe they can accept some rate increases as long as it’s combined with serious entitlement reform and additional spending cuts.  And if we can get the leadership on the Republican side to take that framework, to acknowledge that reality, then the numbers actually aren't that far apart.  Another way of putting this is we can probably solve this in about a week; it’s not that tough.  But we need that conceptual breakthrough that says we need to do a balanced plan; that's what’s best for the economy; that's what the American people voted for; that's how we're going to get it done."

  • A spokesman for Senate Minority Leader Mitch McConnell said, "The president wants to have the ability to raise the debt ceiling whenever he wants, for as much as he wants, with no responsibility or spending cuts attached.  This is an idea opposed by Democrats and Republicans alike; it's a power grab that has no support here."
  • Today, House Speaker John Boehner said, "If the president doesn’t agree with our proposal and our outline, I think he’s got an obligation to send one to the Congress — and a plan that can pass both chambers of Congress.  If you look at the plans that the White House has talked about thus far, they couldn’t pass either house of the Congress."  Boehner added, "We’re ready and eager to talk to the president and to work with him to make sure that the American people aren’t disadvantaged by what’s happening here in Washington."
  • House Majority Leader Eric Cantor announced today that the House would stay in session at least a week longer than the target adjournment date of December 14.  Cantor said, "Members are further reminded that the House will not adjourn the 112th Congress until a credible solution to the fiscal cliff has been found."

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:  As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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