After walking out of the debt ceiling negotiations this week, which Chris Wallace conveniently forgot to ask Sen. Jon Kyl about, Kyl defended the Republicans refusal to raise taxes during this interview on Fox News Sunday. Republicans continue to pretend that trickle-down economics work with their claims that raising taxes on the rich will hurt the economy and Kyl went so far as to pretend raising taxes on those making over a half a million dollars a year would eventually mean taxes being raised on everyone.
I've heard some whoppers as excuses for not raising taxes on upper earners, but this one has to take the cake.
WALLACE: We're going to get to the economic growth aspect in a minute. But let's just go through the taxes because the White House says -- and let's just make it clear what we're talking about here -- the White House says they've given up on the idea of raising tax rates for individuals, even those over $250,000. They understand the politics, as you say, the House, it's just a nonstarter.
But let's go through some of the things, Senator, that they are proposing. Let's put them on the screen.
Limit deductions -- tax deductions for households making more than $500,000 a year to 10 percent of gross adjusted income. They said that would bring in $210 billion over the next decade.
And here's the argument the White House is going to make. I want you to respond to it. They say, do you really want to be protecting mortgage deductions for millionaires at the same time that you are cutting Medicare for seniors?
KYL: Well, let's be clear. What they are talking about is charitable giving, mortgage deductions, that sort of thing. And it always happens -- they aim at the millionaires and billionaires.
But there's not enough money for those folks to run the government for very long. So, they end up affecting everybody. That's what the alternative minimum tax did. And I think that's what actually happened here.
And naturally Wallace let him get away with that with no follow up. Full transcript below the fold.
WALLACE: As we said, the president starts talks tomorrow, separate talks with Senate Democratic Leader Harry Reid, and then with Senate Republican Leader Mitch McConnell.
Given the GOP's refusal to include any new revenue, what's the basis for a deal?
KYL: Well, we have not refused any new revenue. For example, we've been discussing some fee increases and some other things that would actually generate revenue.
But what we object to is changing the tax code. We don't need new taxes right now. We need to reduce spending.
WALLACE: But the White House is talking about $3 in spending cuts for every $1 in additional revenue. Given the fact that you got a divided government, you don't control, Republicans, the whole deal, and given the fact that stakes are so enormous, danger of the country going in default -- why isn't that a $3 to $1, spending to taxes, why isn't that a fair deal?
KYL: First of all, the key here is to get economic growth going again. In the last quarter, our economic growth was less than 2 percent. I think it was 1.8 percent or 1.9 percent. We need to put people back to work.
Most economists agree that in times of economic downturn like this, the last thing you want to do is to add more taxes on to the economy. So, it would be inimical to economic growth and job creation, which is what we all ought to be urging here. When our economy grows and people are making more money, at the same income tax rates, they would pay more a lot more in taxes and the government will have more revenues.
But you don't want to pile taxes on at a time when companies don't have the ability to invest and hire people. That's the primary reason we are opposed to raising taxes right now. There's also a very practical problem in the House of Representatives. It's not going to pass when you have big tax increases.
WALLACE: We're going to get to the economic growth aspect in a minute. But let's just go through the taxes because the White House says -- and let's just make it clear what we're talking about here -- the White House says they've given up on the idea of raising tax rates for individuals, even those over $250,000. They understand the politics, as you say, the House, it's just a nonstarter.
But let's go through some of the things, Senator, that they are proposing. Let's put them on the screen.
Limit deductions -- tax deductions for households making more than $500,000 a year to 10 percent of gross adjusted income. They said that would bring in $210 billion over the next decade.
And here's the argument the White House is going to make. I want you to respond to it. They say, do you really want to be protecting mortgage deductions for millionaires at the same time that you are cutting Medicare for seniors?
KYL: Well, let's be clear. What they are talking about is charitable giving, mortgage deductions, that sort of thing. And it always happens -- they aim at the millionaires and billionaires.
But there's not enough money for those folks to run the government for very long. So, they end up affecting everybody. That's what the alternative minimum tax did. And I think that's what actually happened here.
We have always been willing to consider so-called tax expenditures -- but as the president originally proposed, in the context of overall tax reform. He has said, for example, let's eliminate some of these - they're called tax expenditures even though you don't think of deduction for charitable giving as a tax expenditure. But if we could reduce --
WALLACE: That's money that the Treasury is giving us.
KYL: It's foregoing. And so, if you could reduce some of those, you could also then reduce overall tax rates. And if you look at the United States as a worldwide competitor, for example, the president himself has proposed eliminating some of those things for business so that we could reduce the overall corporate tax rate.
So, what we've said is we're perfectly willing to consider those kinds of issues in the context of tax reform, which we would very much like to do. But we're not going to have the time to do it or be able to do it in order just to raise revenue as part of the exercise which should be about reducing spending.
WALLACE: All right. Let's put up another White House proposal that doesn't involve individual taxes. It involves tax breaks for specific businesses. Put it on the screen.
Eliminate oil and gas subsidies for companies making more than -- have more than $1 billion in annual profits. They say that would raise $21 billion. And again, this is at a time when Republicans are demanding big cuts in government programs and services.
KYL: Yes. There are several answers here.
First of all, if you want gas prices to rise, if you want to pay more than 4 bucks at the pump, then go ahead and do this. That's not what we should be about right now. That kind of tax increase is going to flow right to the consumer. Everybody knows that.
Secondly, what you're doing is picking out one industry in the United States, an industry that employs almost 10 million people, represents about 7.5 percent of our gross domestic product. And you're saying to them, you are not going to get the same kind of tax treatment that all other manufacturing corporations get in the United States. So, we're going to -- we're going to punish you, because you make a lot of money.
It's also true that with those big profits, they have enormous costs of investment. You've, of course, covered the issue of how much it costs to put one of those platforms out in the middle of Gulf of Mexico. It's billions of dollars. So, it's big money all the way around. But you're going to hurt the American consumer if you impose more taxes on them.
[...]
WALLACE: So, in 30 seconds, if he says you got to have taxes, even if it's $1 for $3 in spending cuts that you say no, how does that get resolved in the next month?
KYL: I think the president has to make a decision. Which is more important to him: solving this problem, reducing spending somewhat, or making sure that we raise taxes on American economy? If that's his ideological bench here and under all circumstances that's what he's going to insists on, we got a big problem.
I think at the end of the day, he'll recognize that simply getting a handle on spending and making sure that we cannot hurt the economy is going to be the way to derive revenues in the future when the economy begins to recover.
WALLACE: So, basically, you're saying he is going to agree to your terms?
KYL: Well, I hope so. I hope he'll -- he's got to make that choice, let's put it that way. And the obvious, best choice, I think, is not doing anything to harm the economy at this point.
WALLACE: Senator Kyl, we want to thank you.
KYL: Thank you, Chris.
WALLACE: Always a pleasure to talk to you, sir.
