House Republicans, discouraged by the slow pace of negotiations with the White House, will move their own bill that would hike tax rates on income above $1 million, Speaker John Boehner told his colleagues on Tuesday morning.
Boehner (R-Ohio) told President Barack Obama of his plan last night on a phone call, according to sources. The "Plan B" bill would keep the Bush-era tax rates on income under $1 million.
Boehner's announcement shows that six weeks of talks with Obama have yielded no agreement, even as tax rates are set to jump back to Clinton-era levels at the end of the month and "sequestration," tens of billions of dollars of spending cuts for the Pentagon and other federal agencies, kick in on Jan. 2.
It's also another setback for Boehner and Obama, who have been jockeying over these issues since the failed "grand bargain" talks of summer 2011. With another debt-ceiling crisis looming in early 2013 as the U.S. government runs up against its $16.4 trillion borrowing limit, there are few signs those negotiations will go any better than last year, when the United States suffered a debt downgrade.
Boehner and other GOP leaders are gauging the level of support for the measure, expected to be on the floor later this week.
Boehner made a simple argument to House Republicans that tax rates will go up on everyone come Jan. 1. "The question for us is real simple: How do we stop as many of those rate hikes as possible?" Boehner told House Republicans. Quite simply, the vote is one way House Republicans will avoid blame if the nation goes over the cliff.
"For weeks, Senate Republicans -- and a growing number of you -- have been pushing for us to pivot to a 'Plan B,'" Boehner said. "I think there's a better way. But the White House just can't seem to bring itself to agree to a 'balanced' approach, and time is running short. Taxes are going up on everyone on Jan. 1. They're baked into current law. And we have to stop whatever tax rate increases we can. In the absence of an alternative, as of this morning, a 'modified Plan B' is the plan."
But Democrats reacted angrily to Boehner's move, blasting the speaker for failing to reach an accord with Obama and asserting that Ohio Republican knows his bill can't get through the Senate or get Obama's signature.
"Speaker Boehner's 'plan B' is the farthest thing from a balanced approach," said Senate Majority Leader Harry Reid (D-Nev.) in a statement. "It will not protect middle class families because it cannot pass both Houses of Congress. The Senate bill is the only 'plan B' that can be signed into law and prevent taxes from rising by $2,200 on the average middle-class family."
Reid added: "Now is the time to show leadership, not kick the can down the road. Speaker Boehner should focus his energy on forging a large-scale deficit reduction agreement. It would be a shame if Republicans abandoned productive negotiations due to pressure from the Tea Party, as they have time and again."
House Republicans are expected to move on the bill by Friday or Saturday, sources said. It addresses only taxes, not the scheduled sequester. Boehner said the bill could also include a patch to the Alternative Minimum Tax and the estate tax.
Boehner is seeking big cuts to entitlement programs, but said they don't have to take hold until 2013. Specifically, the Ohio Republican said an increase in the Medicare eligibility age could be implemented then, Boehner told reporters.
"There are a lot of issues on the table. That issue has been on the table, off the table, back on the table. It's an issue for discussion. But I don't believe it's an issue that has to be dealt with by the end of the year. It is an issue, I think if Congress were to do entitlement reform next year and tax reform as we envision, if there is an agreement, that issue would certainly be open to debate in that context."
There was no uproar in the House Republican Conference over either the fallback plan, or Boehner's negotiations with Obama over a $2 trillion deal, according to GOP lawmakers an aides. That's significant, because Boehner has conceded that tax rate increases will be part of any deal.
"It's going to be very severe," said House Appropriations Committee Chairman Hal Rogers (R-Ky.) of sequestration. "It's gonna be very severe, not just for the military, but across all agencies."
Yet Rogers will still back Boehner on his "Plan B" bill.
"I have said all along that sequestration, across-the-board cuts, we abdicate our responsibility to decide how to spend money. That's basically, fundamentally wrong," Rogers added. "However, the law right now is taxes are going up, and this 'Plan B' would be to cut taxes for 98 percent of the people. So yes, the chances are I will vote for it."
Boehner isn't pulling out of negotiations with the White House to strike a sweeping $2 trillion agreement, but leadership sources say they hope this move prods the administration to move toward them.
As of Monday evening, both sides seemed close to an agreement. Boehner has moved off his insistence that tax rates not rise on the wealthy, and has offered the president $1 trillion in fresh revenue -- unthinkable concessions a year ago.
But Obama and Boehner are still a considerable distance apart on taxes. Obama wants to increase tax rates on income over $400,000. Boehner wants the threshold to be set at $1 million; the House GOP proposal would keep the lower Bush-era rates in place for income brackets below that. In essence, Boehner is seeking $1 trillion in revenue and $1 trillion in cuts -- but he doesn't think the president is willing to get there.
"He talked about a 'balanced' approach on the campaign trail," Boehner said. "What the White House offered yesterday -- $1.3 trillion in revenue for only $850 billion in spending cuts -- cannot be considered balanced. We're going to keep the door open in hopes the president can find a way to support a balanced approach."
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