Sen. Chambliss: Reform Tax Code To Raise Revenue

Morning Edition host Steve Inskeep talks with Republican Sen. Saxby Chambliss about the prospects of negotiating a bipartisan plan to avert the fiscal cliff and whether lawmakers can reach an agreement over how to raise revenue. Chambliss was a member of the Gang of Six, a bipartisan group of senators that has tried in the past to reach a long-term deal to reduce the deficit.

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RENEE MONTAGNE, HOST:

Senator Saxby Chambliss, last year, did something unusual for a Republican. He voted to end a corporate tax break. That meant he was effectively voting to bring in more tax revenue and also going back on a campaign promise that he and hundreds of other Republicans have made over the years. It was a pledge not to raise taxes and was drafted by the anti-tax activist Grover Norquist.

SENATOR CLARENCE SAXBY CHAMBLISS: When I signed that pledge, we weren't $17 trillion in debt and things have changed dramatically during that period of time.

MONTAGNE: That's Senator Chambliss, who's made news recently, by joining a string of Republicans who've said they may be willing to raise tax revenue under the right conditions as part of a larger deal to reduce the federal deficit. He spoke with Steve Inskeep about what those conditions are.

STEVE INSKEEP, HOST:

Chambliss has been involved for years with the bipartisan group of senators trying to find a deal without success, which leads to this question. What, if anything, is different this time than past times, when you've tried to bring Republicans and Democrats together on this?

CHAMBLISS: Well, actually, Steve, it's kind of interesting you asked that question 'cause really nothing is different. As you said, I've been advocating for two years now that Congress develop a plan to deal with our long term debt. I've been an advocate for a three-pronged approach. Number one, cut federal spending. We're still spending way too much money in Washington.

And secondly, our federal budget is being choked by healthcare costs, i.e. Medicaid and Medicare, and we've got to make real reforms to those programs to allow their survivability, but also to help get our fiscal house back in order. And then, the third thing is, we've got to get revenues up. That does not mean raising taxes. It means simply reforming our tax code and eliminating loop holes and credits - and I still believe that.

INSKEEP: So in your view, the fiscal realities are unchanged. Are the political realities any different than they were?

CHAMBLISS: Well, in fact, the realities are different in this respect. You have a president who has campaigned twice, now, on raising taxes and he's gotten elected twice on that being part of his platform. Now, I disagree with him on that. I think there are ways that you can generate revenues without raising taxes, but it is a fact that that's been his mantra.

INSKEEP: Given the reality that you've just mentioned, that the president has been elected twice talking about asking the wealthy, as he puts it, a little more, that if that has to be part of the deal, that also includes a lot of things you consider essential, like reworking entitlements. That's something that you could consider?

CHAMBLISS: Well, I've said all along that raising tax rates is not on my radar screen as something that I'm going to do. I'm not going to do anything, unless we have real reforms to entitlement programs; nor am I going to do anything, unless we have significant spending cuts that are put in place. It's all got to happen at the same time.

INSKEEP: That 35 percent tax rate for wealthier Americans, which is what people pay now and have paid since the Bush tax cuts went into effect. Is there something sacred about that, inviolable about that?

CHAMBLISS: Well, here's what bothers me about raising tax rates of folks making in excess of $250,000. The small business community in America generates more jobs than any other segment of our workforce, and too many small businesses fall in that category. And if you raise taxes on an individual or a company that is creating jobs, does that really provide an incentive to that company to expand and create more jobs?

And I think the answer is pretty simple. It doesn't.

INSKEEP: Although, let me just push back and present you with some of the arguments that have been made on the other side, so that you can answer them and we can advance this discussion. If somebody is making $300,000, $400,000 a year in a small business and the marginal tax rate, the taxes on the upper part of their income, goes up a point or two points or three points, they're paying more in taxes, but not actually very much more.

And as far as somebody who's making a lot of money who would pay a lot more taxes, Warren Buffett said the other day, the ultra rich, including me, will forever pursue investment opportunities. In other words, he's saying don't say that it's going to discourage economic activity to raise taxes a little bit.

CHAMBLISS: Well, it's fine for somebody like Warren Buffett to say that when he makes, gee, I don't know, hundreds of millions of dollars a year that he makes. That's entirely different from a small business man who is making three to $400,000 a year. If you raise his tax rates by one percent, two percent, three percent, that's going to make a real difference to that individual. It may be the difference in him hiring one person or two persons to add to his employment role.

INSKEEP: But I'm just thinking about the guy you lay out there, Senator. I mean, we don't know his exact tax form, but somebody who's making three or $400,000 a year and taxes are raised by a couple of percentage points on the upper part of his income, not his entire income, but the upper part of his income. He's paying an extra couple thousand bucks. That's going to stop him from hiring somebody?

CHAMBLISS: Two things I would respond to that with. Number one, Steve, if we don't take this opportunity to reform the tax code, we have made a major mistake. Reforming the tax code does not mean raising tax rates. If that's all we do, we've missed a golden opportunity to really invigorate the economy. And then, secondly, when you reform the tax code, that person that's making three or $400,000 is the person that's going to lose those tax credits and tax deductions to a greater extent than somebody who's making $50,000, let's say.

So they're going to wind up, in all probability, paying more in taxes, but it will be in a different way and at a rate that's actually lower, which will allow them to reinvest what money they do have left over in their business.

INSKEEP: Well, it sounds to me like you're saying that actually that small business man could pay a few thousand dollars more in taxes, but you want it done in a different way, not with raising rates, but with simplifying the tax code, that's what you're saying.

CHAMBLISS: Yeah. But, you know, when you do that, that guy, because of the energizing of the economy, instead of making three or $400,000 in his business, he may make $500,000. And the economy grows and the employment base, and thereby the tax base, grows when you see that economy invigorated like that.

INSKEEP: Do you think that there are going to be enough Republicans, Democrats, just based on your conversations with people, who are close enough that a deal can be made here?

CHAMBLISS: Well, a deal's got to be made. I mean, this is too serious an issue for a deal not to be made. So is it going to be easy? Oh, this is tough, tough stuff, particularly dealing with the short term that we're dealing with right now. But we can't afford to go off this fiscal cliff so I think it's imperative that we do whatever's necessary to try to make sure that we spend the time to get a deal done over the next couple of weeks.

INSKEEP: Senator Saxby Chambliss of Georgia, thanks for talking with us again.

CHAMBLISS: Sure. Always good to be with you, Steve.

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Correction Nov. 28, 2012

This story's original headline implied that Sen. Chambliss plans to raise tax rates. As the senator states in the interview, his plan calls for increasing revenue by reforming the tax code.

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