WASHINGTON — A long-running war between Democrats and Republicans over Bush-era tax cuts doomed the debt supercommittee's chances of reaching a deal. Efforts to overhaul the tax code may await the same fate as both parties gear up to make taxes a central issue in 2012 elections.
Republicans insisted during the supercommittee negotiations that curbing tax breaks to raise revenues be coupled with guarantees that all the Bush tax cuts would continue beyond 2012. The tax cuts, which affect families at every income level, were enacted under President George W. Bush and were extended through 2012 under President Barack Obama.
Republicans for years have bashed Democrats as eager to raise taxes — a theme they will employ often in next year's elections — so they weren't about to agree to a tax hike unless they also could take credit for preventing a huge tax increase scheduled to take effect in 2013.
Democrats countered that the supercommittee was created to reduce the budget deficit, not add to it by extending tax cuts. Most Democrats, including Obama, want to extend the Bush tax cuts only to individuals making less than $200,000 a year and married couples making less than $250,000.
"We simply could not overcome the Republican insistence on making tax cuts for the wealthiest Americans permanent," said Sen. John Kerry, D-Mass., a member of the supercommittee. "This was simply doctrine for some of our Republican colleagues, even as many worked very hard in good faith to find a better way forward."
Another member of the supercommittee, Rep. Dave Camp, R-Mich., said, "It is deeply regrettable that my Democrat colleagues could not see their way to addressing these much-needed reforms without at least $1 trillion in job-killing tax increases on families and employers."
Extending all the Bush tax cuts, including provisions to spare millions of middle-class families from paying the alternative minimum tax, would add $3.9 trillion to the budget deficit over the next decade, according to projections by the nonpartisan Congressional Budget Office. The Democratic plan would add about $3.1 trillion to the deficit over the same period and make the wealthiest Americans pay about $800 billion more in taxes.
The supercommittee was formed to come up with a package that reduces government borrowing by at least $1.2 trillion over the next decade. But with a Wednesday deadline approaching, the committee's co-chairs conceded failure Monday.
"After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline," said a joint statement by the co-chairs, Rep. Jeb Hensarling, R-Texas, and Sen. Patty Murray, D-Wash.
Democrats had said they would accept significant cuts to benefit programs like Medicare and Medicaid, but only if Republicans would agree to tax increases. Despite Republicans' aversion to tax increases, a growing number of GOP lawmakers said they would consider higher taxes if they were coupled with significant spending cuts.
Other Republicans wanted even more political cover: a guarantee that all the Bush tax cuts would be made permanent.
"It's not easy during this hard economic time to go back and justify any kind of tax increase," Rep. Wally Herger of California, a senior Republican on the tax-writing House Ways and Means Committee, said while talks were still ongoing. "But I think if it's going to be justified, this is the one exception that maybe you could use to justify it."
At one point, supercommittee member Sen. Pat Toomey, R-Pa., proposed a tax overhaul package that Republicans said would raise about $290 billion in additional revenue over the next decade but lock in all of the Bush tax cuts.
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