Heller says he would consider deal with higher tax threshold

By Karoun Demirjian

Sunday, Dec. 30, 2012 | 2:51 p.m.

No one yet knows whether there will be a "fiscal cliff" deal and, if it emerges, whether there will be the votes to get it through Congress. But if Democrats would raise their offer on tax rates, Republican Sen. Dean Heller says he would seriously consider voting for it.

“I think there’s a deal to be had,” Heller said. “I believe we’ll probably end up somewhere between four and five hundred (thousand dollars), and I would take a serious look at that.”

Democrats and Republicans have been going back and forth between various income thresholds, above which they would be willing to let tax rates rise. Absent congressional action, all tax rates are set to rise back to 1990s levels after Tuesday.

Democrats want to extend classes just for the “middle class,” which they define as anyone making up to $250,000. Republicans in recent weeks have moved from their conviction that tax rates should not go up at any income level to support proposals that would raise taxes on incomes over $1 million.

The latest round of negotiations started two weeks ago, with an offer by President Barack Obama to extend current, reduced income tax rates on incomes up to $400,000.

“The president’s already said 400. So I can’t imagine it being under the 400 threshold at this point,” Heller said.

At the time, House Speaker John Boehner rejected the offer, which coupled the $400,000 tax threshold with a deferral of scheduled across-the-board government spending cuts and the authority to raise the federal debt ceiling. In exchange, Obama offered to recalculate Social Security benefits according to a “chained” measure of the consumer product index, which slows the rate of inflation of such payments.

Obama since stepped back from that offer, suggesting Congress pass a leaner package, including tax cut extensions up to only $250,000, coupled with an extension of emergency unemployment benefits, which also are scheduled to expire at the end of 2012.

But on Saturday night, Republicans — this time led by Senate Republican Leader Mitch McConnell — proposed a counteroffer that sought to pair the $400,000 figure with just an extension of unemployment benefits and the chained-CPI cost-offsetting measure.

This time, it was Democrats who said no deal — because of the Social Security portion.

“We will not agree to cut Social Security benefits as part of a small or short-term agreement,” Reid said early Sunday afternoon.

Republicans have, in the hours since, dropped the Social Security part of the request. But Heller said disagreement on that point never should have been a reason for talks to reach a stalemate hours before the fiscal cliff deadline.

“At the end of the day, I don’t think most in our conference believed chained CPI would be part of the deal. But it was just on the list,” Heller said. “I’m not one who wants to put Social Security on the table to begin with. Social Security’s the least of our problems right now. We’ve got bigger problems with Medicare, and Medicaid and some of these other issues, and I think we ought to tackle those issues first."

What Heller believes should be discussed, however, is why the Democrats are so dead-set on seeing tax rates above $250,000 rise.

“If you ask the average person what will all these tax increase go to, they will tell you it’s going to deficit spending. Not true,” Heller said. “We’re now finding out that the purpose of this tax increase is to have bigger government.”

Heller detailed part of the “bigger government” spending ventures he warned about as expanded unemployment benefits, extended stimulus programs (the stimulus introduced a variety of new tax incentive programs, some of which are up for an extension along with income tax rates) and even putting off sequestration cuts — which Heller supports.

“They want to postpone sequestration for two years,” Heller said. “You’d have increased spending under those circumstances too.”

But as much as Heller may want to see spending cuts be paired with any tax hikes, he accepts the president’s notion that now is not the time to hash out a large-scale measure to solve the country’s fiscal crises.

“Most of this discussion right now is on tax, tax increases or making tax cuts permanent,” Heller said. “They believe that the spending’s going to come another day and that a couple months down the road we’ll be talking about the debt ceiling.

“Take the spending off the table, let’s talk about tax rates right now and let’s worry about the spending another day, which would be a couple of months down the road.”

So far, a deal on those points has been elusive.

Republicans were told that they would be updated again later Sunday. House Republicans also were scheduled to meet to discuss the progress of fiscal cliff discussions Sunday evening.

“They said between two to six hours; how do you like that?” Heller said. “And that’s just an update. That doesn’t promise a deal or anything.”

But Heller said he actually was feeling fairly optimistic that things were beginning to gel.

“I’ve noticed that some have flights out for tomorrow morning,” Heller said. “I don’t. ... I wasn’t real optimistic coming into this morning. But after the discussions that I’ve heard, I’m feeling a little better that there’s a deal that can be done.”