Corporate Taxes on Table in Cliff Talks

By DAMIAN PALETTA, JANET HOOK and CAROL E. LEE

The White House has told Republicans it would include an overhaul of the corporate-tax code as part of any deal to reduce the deficit, people familiar with the talks said, a move to court business groups as budget negotiations intensify.

Corporate taxes hadn’t until now been part of budget talks aimed at averting spending cuts and tax increases set for January. Much of the focus has instead been on the expiring individual income-tax rates.

The offer from the White House came amid a fresh round of proposals from both sides, as President Barack Obama and House Speaker John Boehner exchanged counteroffers to address the so-called fiscal cliff. Big gaps remain between Democratic and Republican negotiators, and while talks are continuing, there is no guarantee a deal will be struck, with or without a corporate-tax revamp.

The White House’s corporate-tax suggestion wasn’t specific, according to officials familiar with the offer, other than committing to overhaul the corporate tax code in 2013. White House officials, in making the suggestion, cited a corporate-tax plan the administration unveiled in February but said they weren’t wedded to any specifics.

Left unclear is the crucial question of how any revamp would affect companies’ overall tax burden. That is one reason why Republicans considered it a tactical offer only, and not one that might help seal a deal.

As part of its budget proposal, the White House also slightly lowered its target for new tax revenue to $1.4 trillion, down from Mr. Obama’s initial offer of $1.6 trillion, officials said. It retained items from an earlier offer that had irked Republicans, included new stimulus spending and an increase in the U.S.’s borrowing limit.

The White House has told Republicans it would include an overhaul of the corporate-tax code as part of any deal to reduce the deficit, people familiar with the talks said, a move to court business groups as budget negotiations intensify.

Corporate taxes hadn’t until now been part of budget talks aimed at averting spending cuts and tax increases set for January. Much of the focus has instead been on the expiring individual income-tax rates.

The offer from the White House came amid a fresh round of proposals from both sides, as President Barack Obama and House Speaker John Boehner exchanged counteroffers to address the so-called fiscal cliff. Big gaps remain between Democratic and Republican negotiators, and while talks are continuing, there is no guarantee a deal will be struck, with or without a corporate-tax revamp.

The White House’s corporate-tax suggestion wasn’t specific, according to officials familiar with the offer, other than committing to overhaul the corporate tax code in 2013. White House officials, in making the suggestion, cited a corporate-tax plan the administration unveiled in February but said they weren’t wedded to any specifics.

Left unclear is the crucial question of how any revamp would affect companies’ overall tax burden. That is one reason why Republicans considered it a tactical offer only, and not one that might help seal a deal.

As part of its budget proposal, the White House also slightly lowered its target for new tax revenue to $1.4 trillion, down from Mr. Obama’s initial offer of $1.6 trillion, officials said. It retained items from an earlier offer that had irked Republicans, included new stimulus spending and an increase in the U.S.’s borrowing limit.

A small but growing number of Republicans have argued that the party should give up on blocking any rate increase on higher-income Americans and instead shift focus to securing spending cuts as part of the deal.

Some Democrats regard Republicans’ eventual concession on taxes as a foregone conclusion, and they have begun to talk among themselves about which concessions on entitlement programs they might be asked to make.

The three leading proposals floated by Republicans include increasing the eligibility age for Medicare, requiring wealthier people to pay more for Medicare and changing the formula for calculating Consumer Price Index adjustments to slow the growth of Social Security benefits.

Many Democrats are especially concerned about looming Medicare cuts if they include a GOP proposal to raise the eligibility age. “If people are working in coal mines in West Virginia, it’s really inhumane to talk about raising the eligibility age,” said House Assistant Democratic Leader Jim Clyburn of South Carolina, who is close to Mr. Obama. “For those of us in air-conditioned offices to talk about raising the age, that’s fine for us to say.”

Many Democrats acknowledge that any deficit-reduction package will include proposals they don’t like. “There’s no way to do this without both sides giving up something,” said Senate Budget Chairman Kent Conrad (D., N.D.).

Administration officials have been engaged in conversations with Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi to bring them along as Mr. Obama negotiates with Mr. Boehner. Those conversations have picked up in recent days as the White House takes soundings from Democratic leaders on what might be possible for the party to stomach in a final deal.

Republicans are frustrated that they haven’t secured larger spending-cut commitments from Mr. Obama in exchange for what they see as a major and early concession from Mr. Boehner on tax revenue, said people familiar with the talks.

In his speech Tuesday, Mr. Boehner argued that Mr. Obama’s proposed tax increase barely scratches the surface of the deficit problem.

“Even if we did exactly what the president wants, we would see red as far as the eye can see,” Mr. Boehner told the House. Aides said Mr. Boehner decided to make the speech because he believed recent reports of tentative progress in his talks with Mr. Obama played down differences that remain on spending.

The White House rejected Mr. Boehner’s complaint that Mr. Obama hadn’t put forward detailed spending cuts.

“What we haven’t seen from Republicans to this day is a single specific proposal on revenue,” White House spokesman Jay Carney said. “And in fact, we’ve seen less specificity from Republicans on spending cuts than the president himself has proposed.”

A version of this article appeared December 12, 2012, on page A1 in the U.S. edition of The Wall Street Journal, with the headline: Corporate Taxes on Table in Cliff Talks.

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