Could the focus of debt-ceiling drama shift to the Senate? Just one day after Tom Coburn laid out his $9 trillion plan to address the deficit, he has rejoined the Gang of Six and endorsed their new plan calling for $3.7 trillion in deficit reduction. It includes new tax revenue, but it presents a net reduction thanks to the elimination of the AMT:
Democratic and Republican senators are rallying behind a $3.7 trillion deficit reduction plan unveiled Tuesday morning by the five remaining members of the Gang of Six.
Sen. Tom Coburn (R-Okla.), who pulled out of the Gang of Six in May, has rejoined the group and praised the plan as something that could win the 60 votes needed to pass the Senate.
“The plan has moved significantly and it’s where we need to be and it’s a start,” Coburn said. “This doesn’t solve our problems but it creates the way forward where we can solve our problems.”
The plan includes increased tax revenues, but Coburn says that the CBO would score it as a net tax cut:
Coburn, however, noted the Congressional Budget Office would score the plan as a $1.5 trillion tax cut because it would eliminate the Alternative Minimum Tax. It would generate a significant amount of revenue out of tax reform and reduction of tax rates, which authors believe would spur economic growth.
I like the idea of eliminating the AMT, which has become a big problem for Congress and taxpayers alike. When first implemented, the AMT snared only the very wealthy if they got too successful in dodging income tax through sheltering. Congress didn’t index the tax to inflation, however, which meant that each year the AMT started snagging more and more taxpayers, including small business owners who needed their income to drive business expansion. It’s also good to see a focus on increasing revenues through increased growth rather than increasing rates.
If the tax portion of this deal offers real reform in the tax code by lowering rates and flattening the system, then this should be popular among many in Congress. That would be the approach taken by President Obama’s own debt commission, which he ignored entirely, and the approach that I predicted would allow both parties to claim some victories in an eventual deal. It also tackles entitlement spending, more so now than before Coburn returned; The Hill reports that Coburn demanded that as a price for his return, although the proposal doesn’t offer specifics on how to accomplish it.
Both Republicans and Democrats have offered qualified praise for the plan, including Mike Johanns (R-NE) and Kay Bailey Hutchison. This could end up being Plan A if the Senate moves quickly on it — and if the details deliver what the Gang of Six has promised.