Washington INsider

Washington INsiderblog

Mark Schoeff Jr. looks at what's really happening on Capitol Hill - and the upshot for advisers.

Avoiding fiscal cliff comes down to war of wordplay

Will Obama settle for more 'revenue' rather than higher 'rates' from wealthy?

Nov 9, 2012 @ 3:33 pm

By Mark Schoeff Jr.

Fiscal cliff
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((Photo: Bloomberg News))

Washington is a town based on language. Much of the work that goes on here not only is framed by rhetoric but is decided by words – and the meaning attached to those words.

Whether the country plunges over the fiscal cliff may come down to President Barack Obama's willingness to accept the idea that the wealthy would pay more in taxes if they lose access to favors in the tax code that lower their overall bill. Will he settle for more "revenue" rather than higher "rates'? Those two words are key to how the next few weeks unfold.

In dueling press conferences this week, Mr. Obama and House Speaker John Boehner, R-Ohio, essentially opened the fiscal-cliff negotiations.

On Wednesday, Mr. Boehner said that House Republicans are “willing to accept some additional revenues, via tax reform.” Those revenues would come from “closing special interest loopholes and deductions, and moving to a fairer, simpler system.”

On Friday, Mr. Boehner reiterated that position and emphasized that Republicans will not countenance an increase in tax “rates” on the wealthy.

“Raising tax rates will slow down our ability to create the jobs that everyone says they want,” Mr. Boehner said.

This approach allows the Republicans to keep their promise not to raise taxes. They're only raising “revenue.”

A couple hours later, Mr. Obama stepped to the podium in the East Room of the White House. He asserted that his victory demonstrated that the American people agreed with his “balanced approach” to deficit reduction -- in which all income earners pay their share.

“I'm open to compromise. I'm open to new ideas,” Mr. Obama said. But he added: “I'm not going to ask students, seniors and middle-class families to pay down the entire deficit while people like me, making over $250,000, aren't asked to pay a dime more in taxes.”

That's where the outcome of the fiscal cliff will be decided. Specifically, how will Mr. Obama define the point where the wealthy pay more? Will he accept the Republican argument that eliminating tax breaks and loopholes is the equivalent of raising taxes on the wealthy? Or will he prefer the more straightforward metric of increasing their tax rates?

Like many debates in Washington, it will come down to semantics. Can “loopholes” and “rates” be equated?

It's not clear whether Mr. Obama's liberal supporters will be satisfied with an agreement that promises to eliminate special interest loopholes at some point in the future while keeping the tax rates for the wealthiest at the Bush-tax-cut-level of 35%.

Mr. Obama seemed to hint on Friday that he prefers rate increases.

He challenged House Republicans to pass a bill that the Democratic-majority Senate has already approved that would make the Bush tax cuts permanent for households earning less than $250,000. It also would allow individual rates to snap back to 39.6% for those making more than $250,000, which is anathema to Republicans.

“I’ve got the pen ready to sign the bill right away,” Mr. Obama said.

Over the next few weeks, we’ll see whether an increase in “revenue” from the wealthy will allow Mr. Obama to claim victory in making them pay more in taxes. It’s a matter of semantics for a chief executive known for his way with words.

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