Sen. Charles Schumer, a New York Democrat, says any savings from closing tax loopholes should be used to reduce the federal deficit, not to lower tax rates for wealthy Americans.
Schumer backed the 1986 tax reform legislation that did cut tax rates and reduce deductions. He says the government at that time could afford to make the legislation revenue-neutral — yet now it can’t.
“It would be a huge mistake to take the dollars we gain from closing loopholes and put them into reducing rates for the highest income brackets, rather than into reducing the deficit,” Schumer said in a speech today at the National Press Club. “We must reduce the deficit, which is strangling our economic growth. And we must seek to control the rise in income inequality, which is hollowing out the middle class. ”
Republican Mitt Romney, who proposes cutting tax brackets by 20 percent across the board, proposes to pay for that by closing or restricting tax exemptions, particularly for high earners. He hasn’t specified what he would cut. President Barack Obama has accused his Republican rival of proposing $5 trillion of tax cuts without explaining how he’d pay for them.
The speech by Schumer, the No. 3 Senate Democrat, puts him at odds with the No. 2 Democrat, Majority Whip Dick Durbin of Illinois, who sat on the Simpson-Bowles debt reduction commission that favored cutting loopholes and reducing the top tax rate.
Schumer said Democrats should be prepared to offer cuts in entitlement programs in exchange for Republicans agreeing to let savings from loopholes go to reduce the deficit rather than provide additional tax cuts for wealthy Americans. Medicare, for example, could be cut by hundreds of billions of dollars without shredding the safety net, he said. “That is how a grand bargain can be had: Republicans get entitlement reform, while Democrats get revenue,” he said.