How immigration killed the tax deal

GOP didn't want to aid new class of immigrants; Obama balked

By Brian Faler and Rachael Bade
11/26/14 9:44 PM EST

How could a major tax deal brokered by the top Senate Democrat die so quickly
at the hands of a Democratic president?

Immigration politics and Democratic infighting came together to doom the
$400 billion deal even before it had made it into print. The brinksmanship
threatens to disrupt the lives of millions of taxpayers who rely on the
mishmash of expired provisions the plan was trying to revive.

The collapse highlights the fragile coalitions in Congress, where even leaders of opposition parties agreeing to a deal can’t bring it home. It also shows the
newly found boldness of President Barack Obama in the aftermath of the
midterm elections, where the looming takeover by Republicans has him tilting
back toward the liberal base.

Interviews with the key players showed that the two tax-writing panels in the
Senate and House had for weeks been making solid progress toward a final tax
package that looked like it would include the breaks for low- and middleincome
people sought by the president.

But the deal fell apart just as it seemed to be coming together.

The immigration executive order soured the GOP on the tax cuts for the
working poor and middle class sought by Democrats. Republicans worried
undocumented immigrants targeted by the order would begin claiming the
credits in droves. They found a friend in Senate Majority Leader Harry Reid,
who reluctantly agreed to drop his party’s demands to extend expiring parts of
the earned income tax credit (EITC) and its companion, the child tax credit.

The decision infuriated Reid’s colleagues.

“Everyone felt that Reid had suddenly given the store to Republicans and not
gotten much in return,” said a Democratic House aide.

The president, with liberal Democratic backing on the Hill, issued the veto
threat and the plan imploded, making the tax deal the first major collateral
damage of the White House’s immigration action.

The internecine fight comes at the lowest point of the Obama’s relationship
with Reid and the Senate’s soon-to-be disempowered Democratic leadership.

White House officials — from Obama on down — have been feuding with
Reid’s brash chief of staff, David Krone, and The New York Times has reported
that Obama took the extraordinary step of asking Reid to exclude Krone from
White House meetings.

Until late last week, Senate Finance, Ways and Means and leadership met
regularly and were making progress on the package of tax breaks known as tax
extenders. The group of some 55-plus tax breaks have expired, and many
lawmakers in both parties want to renew by the end of the year, amid warnings
from the IRS that failing to act would disrupt the upcoming tax filing season.
They include everything from a major business research credit to one for
teachers to be reimbursed for buying supplies.

Both sides wanted to go big and include more, throwing concerns about the
budget deficit aside. Senate Finance Chairman Ron Wyden (D-Ore.) and the
Democrats were entertaining the idea of more permanent business tax relief
that Republican wanted, and Republicans had even offered to make the
expansion of the earned income tax credit permanent, according to a senior
Senate Democrat aide.

Senate Democrats had made the EITC, a wage supplement for the working
poor, and the $1,000 child tax credit key priorities weeks ago. In October,
Wyden huddled with Finance members to find out what concessions he should
wrestle from Republicans as part of the talks. They agreed on the provisions.
But then the president announced his executive action on immigration late
last week, and it all started to unravel.

Republicans took the Democrats’ tax credits off the table completely.

Republicans had been railing against undocumented immigrants claiming the
child tax credit for years, and the immigration order raised the prospect that
they would begin claiming the EITC as well. If they agreed to extend them
now, it would look like they were voting to expand government benefits to
illegal immigrants.

What’s more, the EITC was notorious among Republicans for fraud. It had one
of the highest rates of improper payments of any federal program. How would
they sell that to rank-and-file Republicans in the House?

Some Democrats worried that the only way Republicans would ever agree to
the provisions is if they included tough new rules aimed at preventing illegal
immigrants from claiming them. So they dropped the idea, figuring that was
better than either risking a crackdown on immigrants trying to claim the
breaks or not getting a deal at all.

“It’s a political reality for Republicans,” said a source familiar with the
negotiations between Reid and House Ways and Means Chairman Dave Camp
(R-Mich.). “Our two biggest priorities, EITC and CTC, got taken off the table
with the immigration announcement.” The source added: “If the immigration
announcement had been delayed, we probably could have gotten something
done.”

Democratic leadership instead emphasized other concessions they had wrung
from Republicans. They got a permanent extension of the American
Opportunity Tax Credit, which helps millions of middle-class voters with the
cost of college. They got a permanent extension of the state and local sales tax
deduction, important to many blue states. They got an extension of a break for
using public transit. And they got Republicans to agree to Senate Democrats’
plans to roll over the rest of the extender provisions for another two years.

But much of the rest of their caucus wasn’t buying it.

By last Friday, Democrats on the Hill not party to the new talks caught wind of
the secret negotiations between Reid and Camp by outside sources. The rankand-file
Democrats were confused: This “came out of no where,” as one Senate
Democratic aide said.

By the time The New York Times on Monday reported that the tax credits
might be left out, the reality had set in that they’d been undercut.
Treasury Secretary Jack Lew quickly weighed in with an abrupt statement —
warning that the administration wouldn’t accept a deal it saw as giving away
too much to Republicans and their allies in the business community.
But news of the deal kept coming.

Rank-and-file Democrats on both side of the aisle were furious with Reid’s
office. They, like the White House, hadn’t conceded that the tax credits were
out of the question.

What’s more, the concessions Reid had won raised eyebrows among some
Democrats.

“The whole reason the state and local sales tax was in there was because of
Harry Reid,” said a Democratic staffer who didn’t wish to be identified.
The provision allows Americans to write off what they pay in sales tax from
their federal taxes. It’s particularly important to states that have no income tax
and rely on sales tax — like Nevada, Reid’s home state.

Likewise, Democrats noted that the mass transit break was particularly
important to Sen. Chuck Schumer (D-N.Y.).

The White House was also furious, the Democratic aide said: “It was pretty
clear that the White House feels like Reid and Schumer were trying to lock in
some provision’s they care very much about … agreeing to a deal that’s overall very poor for Democrat priorities.”

Wyden’s staff set to work preparing a batch of demands for Republicans to
make the deal sweeter for Democrats.

And that’s when the White House swept in.

The White House had kept a distance from the negotiating table. Senate
Finance Democrats were keeping the administration apprised of their talks.
By Tuesday afternoon, following more reports of the deal, White House staff
contacted Wyden’s Senate Finance office to see if there was an agreement.
The staff told the White House there wasn’t — that they had never agreed to
the Reid-Camp deal being reported in the media.

At the same time, Lew and Office of Management and Budget Director Shaun
Donovan had begun calling Democratic lawmakers to urge them to oppose the
plan.

They didn’t have to push very hard, with many agreeing it was a bad deal
without the earned income and child tax provisions.

“We should go back to the drawing board,” said Michigan Rep. Sander Levin,
the top Democrat on the Ways and Means Committee. Those concerns were
echoed in public by Sen. Sherrod Brown (D-Ohio), who sits on the tax-writing
Finance Committee and Rep. Chris Van Hollen (D-Md.), the top Democrat on
the Budget Committee.

A few hours after White House aides spoke with Senate Finance, Obama
himself call Wyden to tell him he’d made a decision: He’d veto the deal.
Senate Finance Democratic tax aides spread the news to the caucus. They
called a meeting at 5:15 p.m. on Tuesday, led by staff director Joshua Sheinkman, and were told: This is not a Democratic deal.

“Without saying it, he was inferring — the Reid folks were trying to cut their
own deal and got too far out in far in front of things,” the aide said. “The
[Democratic] committee staff were pretty pissed.”

They were also told the White House locked in enough Democratic support to
sustain a veto.

The blowup brought negotiations to a standstill. Aides in both parties say they
will take another run at cobbling together a deal after lawmakers’
Thanksgiving break, but neither side is optimistic.

Both sides agree the most likely outcome is the one neither want: A simple
one-year status quo extension of all the breaks.

http://www.politico.com/story/2014/1...al-113206.html

Every year this crap goes on and on and on with the income tax. It's a political football with no goal posts. No matter what they eventually come up with, there's nothing to rejuvenate the economy, there's nothing to bring our jobs and capital back home, there's nothing to send illegal aliens home, there's nothing to reflate wages and salaries, there's nothing to generate enough tax to pay the bills of our government let alone pay down the debt.

It's time for all good men and women in the US Congress, regardless of party affiliation to realize the income tax is a Century of Failure and get rid of it by passing the FairTax, HR 25 in the US House of Representatives and S 122 in the US Senate, bills that have introduced into the US Congress to fix our country since 1999, bills that have one of the largest numbers of co-sponsors of any bill in history. ObamaCare for example had 8 sponsors. The Fair Tax HR 25 has 76 sponsors in the US House of Representatives and S 122 has 9, for a total of 85 sponsors of the legislation. The FairTax brings our jobs and capital back to the country; it protects our trade by removing all tax benefits for producing goods in other countries; it equalizes the domestic tax cost of goods and services between those produced here and those imported while still leaving tariffs, imposts and duties in place on foreign produced goods; it provides a rebate to American Citizens and Permanent Legal Immigrants, illegal aliens are excluded, that removes the FairTax on all spending up to the poverty line for everyone who wants it, balances the playing field between for-profit and non-for-profit businesses, robustly funds Social Security and Medicare and generates more revenue than the current income tax because the rate was established in 1999 before the Bush tax cuts. It also restore liberty and privacy to Americans because it eliminates the intrusive income tax return with all of its mandates, it saves Americans and American businesses over $265 billion a year in compliance costs such as the cost of filing tax returns, and it returns control of the purse to the American people where it belongs.