Members of Congress from both parties are open to revisions in aRepublican plan to raise $300 billion by overhauling the tax code,Democratic and Republican congressional aides said, even aslawmakers publicly rejected competing debt-cutting proposals.

Members of the supercommittee have talked about a higher topmarginal income tax rate than the 28 percent proposed this week byRepublican Senator Pat Toomey of Pennsylvania, a Republicancongressional aide and a Senate Democratic leadership aide said inseparate interviews. Democrats also want additional sources of newrevenue such as ending certain corporate tax expenditures, theDemocratic staff member said.

Each side is waiting for the other to make the next move, theDemocratic aide said. The Republican staff member said Toomey'splan was intended as a framework and not a final offer. Neitheraide was authorized to speak publicly.

“Not much has happened” since the two sides “reached an impasse”this week, Senator Jon Kyl, an Arizona Republican on thesupercommittee, said yesterday.

“Everyone is still focused on trying to get an agreement,”Representative Chris Van Hollen, a Maryland Democrat, said aftermeeting with Kyl.

Publicly, members of the 12-member, bipartisan supercommitteewere downbeat about prospects for a deal to cut $1.5 trillion over10 years. Congress set a Nov. 23 deadline for the panel to reachagreement. Failure to enact a plan by the end of the year wouldtrigger $1.2 trillion in automatic spending cuts in 2013.

“What we still haven't seen from the Democrats is a plan thatdeals with our structural debt crisis, that actually solves theproblem,” said Texas Representative Jeb Hensarling, the Republicanco-chairman of the panel. Still, he said, discussions arecontinuing and “I haven't given up hope.”

Republican and Democratic members on the supercommittee have metone-on-one over the past couple of days in an attempt to findcommon ground.

“We are in a good frame of mind; people are in seriousdiscussions,” said Massachusetts Senator John Kerry, a Democrat onthe panel. Another Democratic member, Max Baucus of Montana, said,“Things are moving well. There are ongoing talks.”

Some Democrats on the committee are proposing a $2.3 trilliondeficit-reduction plan with equal amounts of spending cuts and taxincreases, which Republicans publicly rejected.

Democratic Trigger

The Democratic proposal includes a so-called trigger that wouldraise $650 billion if the U.S. tax code isn't revamped by Jan. 1,2013, according to a document offered to supercommittee members.Tax writers would receive instructions to cap individual tax ratesat 35 percent, overhaul corporate taxation and maintain the code'scurrent progressivity.

Democrats presented the offer to Republicans on Nov. 7. Duringthe same meeting, Toomey outlined his proposal that included somenet tax increases by reducing individual deductions and exclusions,which primarily benefit the wealthy, in exchange for lower rates,according to a Republican aide and a Democratic aide familiar withthe plans.

Toomey's proposal would reduce the top individual tax rate from35 percent under current law to 28 percent.

The six Democrats and six Republicans on the panel remainhundreds of billions of dollars apart on tax revenue.

Dick Durbin of Illinois, the second-ranking Senate Democrat,said his party may ultimately have to accept a deal with lessrevenue than spending cuts. “We're likely to have somethingdifferent” than what his party has been seeking, he said, callingthe Republican plan “some progress.”

“We have a big gap with respect to where we are on revenues,”Kerry said yesterday.

At the same time, Republicans and some Democrats described theToomey proposal as a significant step toward breaking Republicans'no-tax-increase stance.

“Republicans have put revenues on the table,” said Senator LamarAlexander of Tennessee, the No. 3 Republican in the chamber.“Democrats have put entitlements on the table. We need to put moreof each on the table and get a result.”

Under the Democratic outline, the supercommittee would cut thefederal budget deficit by $2.3 trillion over the next decade, with$1 trillion each coming from spending cuts and revenue and $300billion from interest savings. Democrats' proposal last monthcalled for $1.3 trillion in additional tax revenue.

The revenue increases would start with what the documentdescribed as a $350 billion “down payment” of “miscellaneousrevenue provisions.”

Medicare Cuts

The Democratic plan also would include $350 billion in cuts toMedicare, with $250 billion from providers and $100 billion frombeneficiaries. An additional $200 billion in cuts would come fromother mandatory programs. The plan would include $400 billion incuts to discretionary programs, with $200 billion from defense and$200 billion from non-defense programs.

The cuts in entitlement programs would take effect only uponenactment of a tax-code overhaul or implementation of the triggerunder the Democratic plan.

Toomey's proposal would generate about $300 billion inadditional tax revenue when compared with the revenue that would beraised by extending tax cuts scheduled to expire in 2012. Inaddition, Republicans propose generating several hundred billiondollars from non-tax-revenue sources, such as asset sales.

According to Republicans, their proposal would cut about $1.2trillion from the budget deficit over 10 years, with about $700billion of that amount coming from spending reductions.

Bloomberg News

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