Bipartisan talks concerning the deficit continue and Senate Budget Chairman Kent Conrad, D-N.D., a member of the original Gang of Six Senators, believes Republicans could be persuaded to vote for revenue raisers if Democrats promise to provide permanent relief from the Alternative Minimum Tax. Conrad says the AMT, which was originally created to tax wealthy individuals who had used loopholes to avoid paying taxes, needs to be reformed. The Congressional Budget Office projects the AMT would affect nearly half of all households by 2035 unless Congress acts. But a permanent fix will result in lost revenue. Conrad says offsetting AMT relief with revenue elsewhere could help generate the cash needed to reach an overall bipartisan $4 trillion deficit reduction goal.
Another idea is to use a chained Consumer Price Index, recalculating the CPI, which is tied to tax deductions, rate brackets and other government payments. Republicans argue that a broader tax reform bill that lowers overall tax rates would create more revenue than budget experts estimate.
Americans for Tax Reform President Grover Norquist says a revenue-neutral AMT fix would comply with the anti-tax pledge most Republicans have signed, yet a chained CPI would be very bad because it would gradually raise tax revenue.
On a related note, Congressional Republicans have revived an effort to amend the Constitution to require a balanced federal budget. Such an amendment hasn't been seriously considered by Congress in more than a decade. The amendment would prohibit Congress from enacting legislation that would require additional borrowing of funds and add to the national debt. Senator Mike Johanns, R-Neb., says the nation's looming budget crisis becomes less a problem of tomorrow and more a reality of today with each passing day. Senator Chuck Grassley, R-Iowa, notes the federal budget deficit is 15 times bigger today than it was in 1997, the last time there was a vote in Congress regarding a balanced budget amendment to the Constitution.
Grassley says this is the time to bring it up again because the problem isn't that people are taxed too little, but that Washington spends too much. He says history suggests that an increase in taxes will only fuel more government spending, pointing out that Washington has spent $1.17 for every dollar in tax increases. Johanns points to his state's constitutional requirement for a balanced budget and says the federal government could learn from Nebraska's example. Grassley says a balanced budget amendment to the U.S. Constitution is the kind of serious spending reform needed for the sake of America's fiscal well-being.
House Majority Leader Eric Cantor, R-Va., says the House will vote on the amendment the week of July 25. Senate Minority Leader Mitch McConnell, R-Ky., says Senate Republicans will press for a vote after the July 4th recess. An amendment to the Constitution requires more than just Congressional passage. It must also be ratified by three-fourths of the state legislatures.