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McCain open to closing tax loopholes, cutting subsidies

Jun. 21, 2012 - 12:23PM   |  
By KATE BRANNEN   |   Comments

Inching his party closer toward an agreement on deficit reduction, Sen. John McCain said he’s open to a plan that includes measures to raise revenues.

To date, Republicans’ intransigence on tax increases has been one of the main obstacles to Congress and the White House reaching an agreement on how to reduce the deficit. If Congress is unable to come to an agreement by January, roughly $1 trillion in automatic spending cuts, including $500 billion from the Pentagon, will be implemented under a process known as sequestration.

Plans put forward by bipartisan commissions all include a combination of further discretionary spending cuts, reforms to entitlement programs and increased revenues.

The remarks from McCain, R-Ariz., represent a subtle, but continuing shift in Senate Republicans’ opinions on this last piece of the puzzle: bringing in more revenue.

Speaking at the Bloomberg Government Defense Conference in Washington, McCain said he supports closing tax loopholes and eliminating certain subsidies. Whether these represent tax increases, something Republicans adamantly oppose, is in the eye of the beholder, said McCain, who serves as ranking member on the Senate Armed Services Committee.

“Call them what you want,” he said.

Last week, Sen. Lindsey Graham, R-S.C., told ABC News that he was willing to negotiate on eliminating certain tax deductions. While he’s still opposed to raising tax rates, he said he supports elimination of certain deductions and using the savings for deficit reduction.

“We are so far in debt that if you don’t give up some ideological ground, the country sinks,” Graham said. “We need more revenue.”

Speaking at the same conference as McCain, Sen. Carl Levin, Democratic chairman of the Senate Armed Services Committee, said he’s encouraged that at least a few Republicans are willing to compromise on the issue.

He slammed an anti-tax pledge that most Republicans have signed from anti-tax advocate Grover Norquist. Until Republicans move away from this ideological position, there will be no movement on a debt deal, Levin said.

McCain said he supported a plan put forward by Sen. Pat Toomey, R-Pa., which would close certain tax loopholes and raise revenues. He said he would be happy to see an end to subsidies for ethanol production, adding that he does not think this represents a tax increase.

“I think there’s ground for agreement,” McCain said.

However, the Arizona senator said he wants to see more involvement from President Barack Obama.

“I’m not trying to put all of the blame on the president, but he has some responsibility in this dialogue,” McCain said, adding that the president should call House Speaker John Boehner and Senate Republican leader Mitch McConnell to restart negotiations.

Rep. Norm Dicks, D-Wash., echoed McCain, saying it was not OK for the Obama administration to sit back and wait to see what happens.

“I think the White House has been sitting on its hands, watching this. I can’t understand that,” said Dov Zakheim, former Pentagon comptroller and adviser to Republican presidential candidate Mitt Romney.

Zakheim was not optimistic that a larger debt deal could be reached before January.

“I don’t think this Congress can cut the deal. If you could, you would have done it by now,” he said.

Levin was slightly more optimistic.

“I’m confident there won’t be a sequester, but I’m not confident that it will be solved before the prospect of sequestration already does damage,” he said.

Several industry and government officials have warned that companies and local governments will be forced to plan for sequestration well before it is scheduled to take place in January. The actions they take to prepare, including hundreds of thousands of layoffs, are expected to have damaging effects on the economy.

“We need a signal, if not a large bipartisan agreement, that we’re going to avoid this,” Levin said. “There are many initiatives, many quiet conversations going on about how to avoid it.”

Levin said if 10 Republicans and 10 Democrats could get together and sign a piece of paper that says they’re willing to look at entitlement reform, increased revenues and further cuts to discretionary spending, this could send a reassuring signal that compromise is possible.

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