The deficit reduction “supercommittee” in Congress appears increasingly unlikely to make any decisions on taxes before its impending deadline.
The 12-member bipartisan joint committee has a deadline of Nov. 23 to come up with about $1.5 trillion in deficit reduction measures over 10 years, under the deficit reduction deal worked out between Congress and the Obama administration last summer.
Despite a proposal last week by Republicans to raise about $300 billion in tax revenues by eliminating many popular deductions in exchange for lowering the top tax rate from 35% to 28%, Democrats on the committee balked at shifting the tax burden to lower-income taxpayers and making steep cuts to entitlement programs like Medicare and Medicaid (see Congressional ‘Supercommittee’ Takes on Tax Reform).
Democrats on the joint committee countered with a proposal more equally balanced between tax increases and spending cuts. The supercommittee has effectively deadlocked despite the dueling proposals, according to to Congress’s two tax-writing committees, the House Ways and Means Committee and the Senate Finance Committee. The supercommittee would send them a target figure for tax revenues, and the two committees would work together to come up with a way to reach it.
However, the two committees are controlled by different parties, which could make it difficult for them to reach an agreement. Republican presidential candidates such as Newt Gingrich and Rick Perry have said they would not endorse any deal that led to higher taxes.
Failure to reach a deal could lead to a further downgrade in the credit rating on U.S. debt by Standard & Poor’s and possibly other credit-rating agencies. House Majority Leader Eric Cantor, R-Va., however, said Monday that he believed the supercommittee would manage to agree to a deal by November 23, according to the Associated Press.
If the supercommittee fails to reach an agreement, that would lead to about $1.2 trillion in automatic spending cuts in both defense and non-defense spending, including entitlement programs, under last summer's deficit reduction deal. President Obama has said he would not agree to any legislation to override the automatic spending cuts.
This article first appeared on Accounting Today.