What Minnesota’s Republicans want in a ‘fiscal-cliff’ deal

REUTERS/Larry Downing
While congressional leadership and the White House work to hash out a plan, most lawmakers on Capitol Hill are left waiting to see that might look like.

Rep. John Kline: Republicans have agreed to increasing revenues … and it seems all the president can do is talk about raising tax rates, on family businesses. I think that is a mistake, serious economists we talk to and hear from say that’s a mistake. It’s going to have a negative impact on the economy, it would further restrict growth, we have such a low growth rate right now we’d plunge back into a recession.

Rep. Erik Paulsen: The elections are behind us. I think it’s really important for people to get out of campaign mode and sit down and negotiate over those issues. That means being results-oriented, being solution-oriented, and we can absolutely avoid going over the fiscal cliff. But it’s going to take the president coming forward with his balanced approach. What does he recommend on the spending side of the ledger, too?

Rep. Michele Bachmann: President Obama said in 2010 that maintaining the current tax rates for all Americans was “the right thing to do.” Two years later, the economy is still struggling and it is equally as important today that we do not cripple job creation and economic growth by raising taxes.

Rep. Chip Cravaack: He’s going to have a fight on his hands. … The way they’re proposing it, those at $250,000 and above, that runs the government for eight days. All this is, is vilification of those that make over $250,000. It’s creating an enemy that isn’t really there. These people are the small business owners of America. They’re the people that employ people. Why would you want to penalize small business? I believe in lowering the tax rates to expand the tax base.

Many Republicans, from House Speaker John Boehner down, have opened the door to some new revenue through reforms to the tax code. Minnesota’s Republicans, however, are divided on going down that path.

Kline: The majority of the conference, the Republican conference, has agreed to increase revenues in conjunction with some reform of the tax code that would keep rates down and close loopholes or limit deductions. … We’ve moved, markedly, in the direction of raising revenues. The speaker has talked about $400 [billion], $500 billion in revenue in reforming the tax code and limiting deductions and closing loopholes.

Rep. Erik Paulsen
Rep. Erik Paulsen

Paulsen: It’s important to note that you can’t only cut spending, you’ve got to bring in more revenue. And my idea of bringing more revenue is through economic growth and pro-growth policies. And it’s not getting into fights over marginal rates and those kinds of things that I think end up being distractions. The real issue is, what can we do to reform the tax code, to bring in more revenue and pro-growth policies and we can absolutely do that without raising taxes. Eliminating loopholes, deductions and things to make the tax code a lot simpler, a lot more competitive. That’s the direction that I think we need to do.

Bachmann: We simply cannot demand more money from taxpayers without changing the way Washington spends money. Reckless spending — and the moral question of what type of future we will leave our children and grandchildren — is the larger issue we face, and that’s where the conversation should be primarily focused.

Cravaack: Until I see a solid proposal from the Democrats regarding identified spending cuts, then I’m not willing to talk about revenue. … Then we can talk about revenue that doesn’t hurt the economy.

All four Minnesotans have taken the Americans For Reform pledge to oppose any attempt to raise taxes. The pledge has become somewhat controversial among Republicans now grappling with a deficit crisis. To varying degrees, the Minnesota delegation said the pledge is essentially an expression of their opinion on taxes, but not necessarily something to guide them during this fiscal cliff debate.

Paulsen: I think those that have signed the pledge would acknowledge very directly that it absolutely allows members to support tax reform. And that, again, is the ultimate goal that we want to get to. I think it’s just really important to keep an open mind, from the perspective of, what do we do to help revamp the tax system, the tax system to keep up with a modern economy. I think every member would interpret it that way.

Kline: The pledge is not to raise taxes … but virtually everyone who signed it did not look at it as precluding us from getting real tax reform.  In fact, Grover Norquist is for real tax reform. I’ve run on that issue, I’ve campaigned on it, I’ve voted for it, a flatter, simpler, fairer tax or the fair tax, a national consumption tax. Real tax reform. I think that everybody who signed that pledge would say that’s their understanding of what that means.

Cravaack: It’s a sidebar. What are we concentrating on this for? Is it going to create any solution to the problems that we have now? Let’s focus on what’s important. Let’s get our economy back on track, let’s get people back to work. Let’s make sure we have a solid military, those are the things that are important.

Republicans have looked to publicly pressure Democrats into discussing the spending side of the equation while they grapple with the taxation side. Their opinion — both in the party as a whole and in the Minnesota delegation — is nearly unanimous: entitlement cuts, and reforms along the lines of those in the House GOP budget, must be on the table.

Kline: We have proposed those ideas. There are some things you could do: in Medicare, for example, we talked about using some means testing, switching, for younger people, to an option of premium support so you could bring competition into it. If they don’t like that proposal, fine, give us another proposal.

Cravaack: You have to address the elephant in the room, and those are Social Security, Medicare and Medicaid. You have to talk about those and how you’re going to reform the system. Medicare is insolvent in 2020. It’s going broke.

Paulsen: The president himself has said that health care and Medicare and entitlement programs are the drivers of debt. So he should really, to have a balanced approach, he should be coming forward as well with proposals. … The House moved forward, even on premium support and Medicare. That may not be the final answer, but put something on the table. The president needs to come forward with what he wants to do, and I think that’s what Republicans are saying.

The four are also split on how to go forward with defense spending — all oppose the $600 billion in automatic defense cuts scheduled to kick in at the end of the year, but they disagree on the extent to which it should be a part of a deficit deal.

Kline: We cut defense spending this last year in the budget window by close to $500 billion. So it’s already there. What we’re faced with now, with sequestration, is an additional $500 billion in cuts that are just across the board. They are what you might think of as mindless cuts. And that’s just disastrous. … We can’t have that happen. If you want to talk about cutting wasteful spending in defense, fine, let’s identify some of that. That’s a different issue than this mindless whacking at every single program in the department of defense.

Rep. Michele Bachmann
REUTERSRep. Michele Bachmann

Paulsen: The sequester’s not done in a very thoughtful or strategic way. It’s across the board and it’s not targeted toward inefficiency. So that’s why we should be focused to help areas of defense, but defense absolutely should be on the table.

Bachmann: Cuts to every federal department should be under consideration, but it must be done in a serious, responsible way. Sequestration, on the other hand, which I voted against, irresponsibly hacks at important programs.

Cravaack: Defense is always on the table, but take a look around. Look what’s happening in the Middle East right now. Look what’s happening in the South China Sea right now with China. Do you really think it’s a good time to cut spending for the military? I personally don’t.

The delegation said it was too soon to say if they would support new revenue in exchange for the entitlement reforms they’re calling for.

Kline: The Democrats have offered nothing about addressing the big drivers of spending, and that’s entitlement spending. Let’s hear something from them. They just insist on raising taxes on family businesses, and we think that’s just a terrible idea.

Paulsen: We need to know what spending cuts the administration is going to propose, and make sure they’re real, that they’re not phony numbers. … It’s just really important, if we’re going to fix the health of the economy and give confidence to investors and employers to hire people, we’ve got to make sure we don’t have Washington funny numbers.

Cravaack: Show me a plan. Right now there is no plan. … It’s just common sense. It’s the same common sense that I use when I open my checkbook. The same common sense families use when they budget for their families. The same common sense needs to be applied to the federal government.

You can also learn about all our free newsletter options.

Comments (18)

  1. Submitted by jody rooney on 12/05/2012 - 09:25 am.

    If a small business can’t get it’s taxable income under $250k,

    it needs a new accountant.

    It would be helpful to identify just how many small businesses are in that $250,000 and under group and how many are over.

    The sad thing about business rhetoric is that there is a big difference between mom and pop stores and Wallmart. All businesses are not alike and they shouldn’t be lumped together.

  2. Submitted by Susan McNerney on 12/05/2012 - 09:37 am.

    It doesn’t matter what they want

    There is no “fiscal cliff”; not only are the consequences of the automatic deal not particularly dire, some are actually good – cuts to defense are long overdue. The defense department hasn’t been audited in 20 years and has ballooned beyond all necessary proportion. If this is the only way we can get real restraint in defense spending, so be it.

    The middle class tax cuts will be put back into place very quickly, as they have already passed the senate. All Obama has to do is let January 1st come around and let the republicans cave on that issue. They will cave.

    Obama negotiated a decent deal on the rest of the so-called “cliff”. He doesn’t need GOP approval for the tax increases on the top earners, as those happen automatically. All he needs is their approval on the cuts for the middle class. As I said, they will cave, and it will be easy for them to cave when the time comes because it represents a cut – therefore not violating their marriage vows to Grover Norquist.

    The democrats won the popular vote in the US House by over 1,000,000. You read that right – the dems got more overall votes in the house. The GOP only exists as a majority because of partisan gerrymandering. But that gerrymandering is not a sure thing – in order to accomplish it, the GOP had to actually reduce their margins in many safe GOP districts. This doesn’t bode well for their future.

    They have no mandate. they have little support. The public blame them, overwhelmingly, for obstruction. And their days are numbered as America moves on demographically and ideologically.

    The best thing that can happen to this country is to just hop off this fiscal curb, as some now call it, and let the chips fall. We’ll all be just fine.

  3. Submitted by Tim Milner on 12/05/2012 - 10:40 am.

    To Jody’s comment

    I guess I need a new accountant.

    Just exactly what do you define as a small business? The US Small Business Administration defines it here


    That means people like me, 70 employees, less than $10M in sales, are certainly small businesses.

    Does it really make sense that we should have income less than $250,000? Because, if we did, we would never earn enough money to buy and maintain the nearly $3M worth of equipment in the $2.5M building that we use in our manufacturing process.

    I wish we were Walmart. Because the tax breaks Walmart gets are things we can only dream of. Small businesses in general, and those in manufacturing in particular, have some of the most onerous tax situations around. Most of us are organized as Subchapter S corps which treats our profits like personal income, subject to rules, such as Alternative Minimum Tax (AMT) that almost always inflate the amount of taxes owed.

    I certainly do not consider myself poor. But, I, like most of my small business clients, are far, far away from the million dollar bonuses and salaries you hear reported. Yet, because of the tax rules, nearly all of us will have over $250,000 in “profits” – even if much of that profit is just on paper and not cash in our pockets.

    All our profits are considered earned income. Warren Buffet’s profits are mostly capital gains on investment. So, if we raise tax rates, I will pay more, but Buffet will not (not 1 politician is proposing any changes in capital gain rates).

    I have employees hoping for wage increase, health care costs going up ~11% (of which my company pays the vast majority of), a likely Fed tax increase, a property tax increase due to a school referendum, a likely MN state tax increase. I have a sales forecast that is pretty uncertain – mainly due to the uncertainty in healthcare costs and tax plans.

    Just exactly where am I expected to find the money to handle all that? And since taxes have to be paid, which expense do you think I will have to short change? (healthcare and salary increases that which ones)

    So, let’s just keep up the rhetoric that the wealthy need to pay more. It’s a sure way for guys like me to be able to help us grow out of recession – NOT.

    • Submitted by Dan Landherr on 12/05/2012 - 12:16 pm.

      I replied to this once already but you may not have seen it

      Obama is planning on letting capital gains taxes revert to the 20% rate and dividends revert to earned income tax status. Your statement is not true.

    • Submitted by James Hamilton on 12/05/2012 - 01:13 pm.

      Many valid points, sir.

      But you misstate a few facts. Increased wages and health care costs may reduce your income, as the owner of a sub-S corporation, but they also reduce the amount of profit on which you pay income taxes. No profit, no income taxes.

      I have no idea what your net may be, nor is it any of my business. However, as another reader points out, an additional 3% on taxable income over $250,000.00 is not particularly onerous. Even if your net is $1.25 million, your tax increase is $30,000.00. A lot of money, certainly. But is it so much that you aren’t going to hire that additional employee, upgrade equipment or take other steps to increase your productivity and profits? As the former owner of a very small business, I think not.

      • Submitted by Joseph Skar on 12/05/2012 - 11:13 pm.

        Liquidity and risk

        I think the parts you are missing in the extra 30k you describe above are liquidity and risk. How do I find the liquidity to pay the increase, not all taxable income results in the wherewithal to actually pay. In your example you would be looking at approx 430k of just fed tax liability. The second question is should I continue to reinvest capital in a business in which effectively all of my investment could be at risk and my max upside is less than 50 cents on a dollar earned, if I can earn a dollar. So what’s the solution to a small business owners? Lever up and pay a distribution to take your personal capital off the table but weaken the balance sheet of the business?

      • Submitted by Bob Petersen on 12/06/2012 - 02:14 pm.

        $30k is not a lot of money???

        So because the government can’t figure out how to save money or have decent programs, they should deserve to get more from someone else? That’s bunk. Look at the so-call ‘hailed’ stimulus. The government spent, what, $300k for each created or ‘saved’ job. You can get 7 median level paid jobs for that from people like this business owner. What’s more effective? Pretty easy math.

        The big problem is that everyone is so tired of government getting more and more money. Instead of paying down the debt, they spend more. We are $1T over budget since Owebama came into office. The spending is where it needs to be fixed because it is obvious it is not working unlike the Dems, who controlled the entire Congress at the time also sold us. You have to starve the beast to make it work. Not put it on the backs of those that make our contry great.

    • Submitted by Ginny Martin on 12/05/2012 - 03:55 pm.

      small business taxes

      This is the hoary old argument republicans bring out as one reason for their opposition to new tax proposals, But it’s not true and it doesn’t mean $250,000.
      Internal Revenue Service statistics indicate that only 3 percent of small businesses would be subject to the higher tax, and many studies of previous tax increases suggest that it would have minimal impact on hiring.
      The Joint Committee on Taxation reported that 97 percent of all businesses owners do not earn enough to be subject to the higher rates, which would be levied on income of over $200,000 for individuals and $250,000 for families. 90 percent of the tax cut would be derived from businesses without employees.

  4. Submitted by James Hamilton on 12/05/2012 - 12:05 pm.

    No surprises here, are there?

    Except, perhaps, Rep. Paulsen’s call for putting campaign season behind us. Sadly, when one reads further one realizes that his call for reason is made to the Democrats.

    Here are some suggestions the Republicans could offer:

    Coordinate the age for Medicare coverage with the age for full Social Security benefits, relying on the ACA to insure that people have medical coverage before then.

    Delay the age for early Social Security benefits and/or increase the discount for early receipt of benefits. Who is it that retires early, anyway? Certainly not the working poor.

    • Submitted by Ginny Martin on 12/05/2012 - 04:02 pm.

      retiring early

      The working poor and middle class people retire early all the time. Some may because they are comfortable enough with income from other sources, but many workers retire because of health problems, physical problems, inability to do the job they’ve been doing for years because of physical problems. The body doesn’t start breaking down after age 67 or 69. And it doesn’t break down evenly. If you’re loading trucks with 50 lbs or more of crates, you are not going to be able to do that when you reach your 60s. Or sweeping floors. Or driving over the road trucks. My dad was a truck driver for many years but he finally had to quit because of difficulties in getting regular, decent miles, loading and unloading with arthritis, and other problems all associated with over-the road driving. If you think this kind of work is OK until you’re well in your 60s and 70s, think again. Try it. Even sitting behind a desk does not ensure decent health at 65.
      But all of you know this.

  5. Submitted by Tom van der Linden on 12/05/2012 - 12:10 pm.

    Some perspective on the small business tax burden

    If Tim is generating $250,000+ in net income, he is doing well as a small businessperson. I salute him! If he owns $5.5 million in buildings and equipment, he has excelled as a business owner, building excellent assets for retirement some day. (He is depreciating those assets now, without tax. Many small businesspeople pay little in taxes after depreciation, those that do are making a good profit.) Tim may have found a way to own the building himself, and rent it to his small corporation. That way he might avoid some more taxes. His social security caps out early in his income bracket, so he doesn’t have to pay payroll tax on that.
    Let’s do a quick “back of the envelope” calculation. If, as the economy picks up, Tim earns, say $300,000, and the federal income tax bracket jumps 3% for earned incomes over $250,000, Tim’s net tax increase is $300,000-$250,000 x .03 = ($50,000 x 0.03) = $1,500.

    Now Tim, as a former small business owner myself, I know few people understand how hard you work and the risks you take. Nor do they fully understand how much you do for your employees, and you likely donate a lot to your community. Calculating estimated taxes, planning for them, saving for them, is no fun. You do pay a lot in income taxes, and Minnesota takes a big state income tax bite, too.

    But really, all this upset over $1,500? That’s the cost of a sunroof and heated seats on a new car. If we are going to get along in this world, we are going to have to take a balanced approach to recover from the worst financial debacle in almost a century.

  6. Submitted by jody rooney on 12/05/2012 - 01:57 pm.

    Tim as Tom said crunch numbers before you cry wolf

    The same “bad at math” is causing an artificial market in land in Iowa.

    I also have another question for you Tim. Why do you want to stay in the health care business? When the ACA came around why weren’t you lobbying congress to get out of the business and support national healthcare. As it is now you could also raise wages but have your employees buy their own insurance.

    As for raising the age for social security first of all we have more than enough employees in the country and second age discrimination is alive and well. It was tough to apply for a job when I was 50 I couldn’t imagine doing it now.

  7. Submitted by Dennis Wagner on 12/05/2012 - 07:14 pm.

    The Oath

    “All four Minnesotans have taken the Americans For Reform pledge to oppose any attempt to raise taxes”

    So. we can interpret this to mean: All our republican representatives have pledged allegiance to Norquist first and the United States of America 2nd?

    They are definitely walking the Norquist talk as they try to talk the USA walk!

  8. Submitted by peter delong on 12/05/2012 - 10:50 pm.

    the more I listen to the fear of those on the rhetorical Right

    the more I wonder if they are indeed as “conservative” as they espouse? Indeed Shawn Hannity belies the neoliberal position quite candidy when he argues the Tea Partiers have given in to “Obama’s rhetorical position” and begin to squabble, as Boehner and his elite capitalist cronies are beginning to do, over revenue increases as they try and sneak under our noses in libelous rhetoric of Liberty such as “tax system reform.”

    Indeed “reform” is better than “overhaul” or “abolishment” don’t you think? Has a more compromising air to it? And that my friends, is the essence of democracy: compromise. Obama should very well call the Republican’s bluff and allow the ecconomy to go over the fiscal cliff. Would it be that much worse the the Great Recession of 2008? I think not.

    What it will do, is drag our rhetorical war of words and ideals of dis-regulated free-market capitalism which got us into this economic mess in the first place to a more rational, lucid, real and, gasp… workable middle gorund where solutions can be decided on. The Tea Party is over, thank goodness! Now let us govern in the middle and actually solve some of our problems then continue the plithy preaching in elitist rhetoric such as wanting to “shrink government so we can drown it in the bathtub!”

    We are the People! Government is us. We elect our representatives from our communities. We send them to Washington to represent us, not to govern us. We govern ourselves, politicians right the rules into laws but the lasws come from the people. And not the elites on right or left, coporate or statist.

    Those of us in the 99% are already at the bottom of the cliff thankyou very much, We are waiting for the rest of you thumb-suckers to quit your squabbling and come join us in solving real problems and quit fighting over the spoils of those John Galt idealist snobs on Wallstreet.

  9. Submitted by Chad Quigley on 12/06/2012 - 12:41 pm.

    It’s the spending stupid

    Everyone here who is in favor of raising taxes on the “evil” rich is missing the point. The Feds and the State have a spending problem, not a revenue problem. The only thing that raising the taxes on the rich will do is make you feel better. Increasing taxes is never the revenue generator the government believes it will be yet they spend to what they projected the revenues would be and then we end up where we are today. We are all going to pay for the tax and spend orgy the democrats want.
    The rich already pay their fair share along with the fair share of the bottom 50% of people who pay no income taxes. Don’t believe me, look it up on the IRS web site. Yet those who pay no income taxes receive large benefit from the government and pay nothing for what they receive. I think the “fair” thing to do would be to make those who receive more than they pay, actually pay for some of what they receive. Crazy ol’ Joe Biden says it is patriotic to pay taxes. Does that mean 50% of tax filers are not patriotic?
    A question for all you “tax the rich” people. At what rate of taxation would you be comfortable with and stop complaining that the rich don’t pay their fair share? 50%? 60%? 70%? Give those of us who believe the government takes too much already a number you feel would stop you from complaining. Problem is we know that it will never be enough for you and that you will always be asking for more. Your kind would rather everyone be equally miserable instead of people being spread across the economic spectrum. Contrary to popular belief, no one owes you squat.

    • Submitted by Dan Landherr on 12/07/2012 - 10:15 am.

      Which government benefits do you no longer wish to receive?

      If the government is spending too much money on you, please tell us what benefits you receive that should be cut.

  10. Submitted by Kenneth Kjer on 12/06/2012 - 03:53 pm.


    It is interesting that Bachmann will not respond one on one to questions from people in her district. I have sent two emails to her in the last week asking her to explain in detail the GOP stance about not taxing the rich and the 2nd one about cutting social security benefits. She just doesn’t respond.
    The arrogance of the GOP is incredible and they still have the my way or highway attitude and don’t seem to think they need to respond to voters.

  11. Submitted by Dennis Wagner on 12/06/2012 - 07:32 pm.

    Its the spending stupid?

    Perhaps its the: What we are spending on? Defense, Farm price supports,including killer Tobacco, politicians and their sweet perk and retirement packages, $429 B oil companies with (special Tax deductions), super Tax loop holes for the “Very well to do” and corporations.

    No mandatory military service? Only the poor get to serve and die for their country!

    Perhaps its the :Who got the best deal on tax dodging? Capital gains taxed lower than blood and sweat income? (Where is the Right wings moral stance from this perspective?)

    Legislative Economic Slavery: Lending and credit laws insuring the poor will be forever, paying 20-30% tax rates and 10-20%+ interest rates to those that claim < 14% tax rates A multimillion $ a year income pays < 14% of income on taxes, SS, Medicare, Healthcare, 401K Retirement etc etc. etc. A $100K a year pays ~ 50% income on the same items, paid on every $ of income. Surely you jest that all enjoy "EQUAL FAIR LEVELS OF TAXATION"?

Leave a Reply