'Fiscal cliff': Is there a Plan C to avoid tax increases, spending cuts?

By MARCELLA KREITER, United Press International  |  Dec. 23, 2012 at 4:16 AM
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CHICAGO, Dec. 23 (UPI) -- The lights are out in the U.S. House and the members are tucked into their homes for Christmas.

A year's work well-done behind them? Not hardly.

As they headed home at the end of last week having refused Speaker John Boehner's last-ditch plan to avoid the so-called "fiscal cliff" and give them cover for tax increases -- a plan that had been pronounced dead on arrival in the Senate and also rejected by President Obama -- the nation remained in limbo.

At the stroke of midnight New Year's Eve, the tax cuts enacted during the administration of George W. Bush are set to vanish. Massive across-the-board spending cuts mandated by the Budget Control Act kick in, threatening to gut national security and rend the social safety net. Taken together they represent a $500 billion shock to the economy that economists say could push the nation back into recession, increasing the unemployment rate, currently at 7.7 percent, back up to more than 9 percent.

Boehner, R-Ohio, has had trouble controlling his caucus from the get-go. Conservatives are loathe to raise taxes on anyone, hence the demise of Boehner's so-called Plan B, which proposed keeping tax rates the same for the first $1 million of income but then allowing taxes on amounts of more than that to revert to the levels in effect during the administration of President Bill Clinton. Obama wants the tax rates to revert for those making more than $250,000.

A companion bill to Boehner's tax plan, the Spending Reduction Act of 2012, cuts funding for such programs as Meals on Wheels, dismantles aid for homeowners and eliminates the Consumer Financial Protection Bureau.

"This bill is a step backwards and it's nothing more than a dangerous diversion," Amy Brundage, deputy White House press secretary for the economy, said in a blog post.

After Boehner canceled a vote on his plan late Thursday, he washed his hands of the issue, saying it was up to Obama and Senate Majority Leader Harry Reid, D-Nev., to come up with a solution, an indication his days as speaker may be numbered. The White House issued a statement saying Obama will continue to "work with Congress to get this done." That would mean to move a plan out of the House Boehner would have to rely largely on Democratic votes since he won't be able to count on Tea Party or other conservatives.

During the presidential campaign, GOP challenger Mitt Romney advocated slashing tax rates to help the economy and allowing increased employment and sales to increase the federal revenue stream.

Robert Genetski, The Heartland Institute's policy adviser for budget and tax policy, said Obama never had any intention of reaching a deal with Boehner, despite his pronouncement during the campaign he wanted to achieve a "grand bargain."

"The president's 'compromise' proposal indicates he is following the advice of his advisers to let the upcoming tax increases go into effect," Genetski said. "This has been their plan all along. The advisers believe the president can convince the public that Republicans are responsible for the tax increases. Once he does, the president will not only be able to dictate who receives breaks from the new higher tax rates, but he will also be able to keep much of the new revenue to fund additional government programs."

Clifford Thies, professor of economics and finance at Shenandoah University, said on the Heartland site barring an agreement that reflects the beliefs of both Republicans and Democrats "going off the cliff is not a bad idea."

"The new economics of the fiscal underpinning ... suggests that, by slashing the deficit, going off the cliff would restore investor confidence, so that cash that has been sitting on the sideline would be invested. If the new economics is correct, the growth of the economy sparked by investor confidence could soon eliminate the remaining deficit," Thies said.

By Friday, however, a Plan C was emerging on the left that would sock it to big corporations, whose share of federal tax payments had fallen to less than 8 percent in 2011 from a high of 32 percent in 1952, said the Institute for Public Accuracy, which says it enables progressive and grassroots organizations to get their views before the media.

The institute said more than 600 business owners and executives have signed a letter to Obama and Congress, urging a tax system "that is fair and provides sufficient revenue for the public services and infrastructure that underpin our economy. When powerful, large U.S. corporations avoid their fair share of taxes, they undermine U.S. competitiveness, contribute to the national debt and shift more of the tax burden to domestic businesses, especially small businesses that create most of the new jobs."

"Now is not the time to lock in low corporate taxes," Joseph Magid, president of Gryphon Systems, a Wynnewood, Pa., management consulting firm, told Business for Shared Prosperity, which describes itself as a national network of forward-thinking business owners and executives. "Our country can not afford to keep giving tax breaks and loopholes to giant corporations at the expense of smaller businesses."

"The corporate tax code should not give incentives to U.S. multinational corporations to hide their revenues offshore and avoid paying their fair share," Eric Henry, president of TS Designs, a T-shirt manufacturer in Burlington, N.C., told Business for Shared Prosperity.

"Small businesses like mine put our money back into our operations, which keeps jobs, investment and tax dollars right here in our own communities."

Lew Prince, managing partner of Vintage Vinyl in St. Louis, said revenue-neutral corporate "tax reform" is not an option.

"There's nothing neutral about big business tax dodging -- it's unpatriotic, plain and simple," Prince said.

Reshonda Young, operations manager of a small Waterloo, Iowa, delivery service, told the Main Street Alliance network of small-business coalitions small businesses are not afraid to compete with the big boys but they need "a fair fight, not one in which big corporations use loopholes to avoid their taxes, stick our business with the tab, and rob our nation of the resources we need for a healthy economy."

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