Democrats are developing plans to mitigate or offset sequestration in order to buy additional time for growth, POLITICO’s Ben White reports. In his Morning Money newsletter Tuesday, White wrote that Democrats are bouncing around several ideas to cut the $85 billion cuts for fiscal year 2013. As part of the New Year’s Eve “fiscal cliff” deal, the cuts for 2013 were delayed and reduced, and Democrats are trying to stave off or offset the across-the-board slash.
White identified several possible Senate Democrat sequester replacements:
- Closing off a variety “offshore tax shelters.” It’s not clear if this is for personal income taxation or corporate taxation.
- Ending preferential tax treatment for private equity and hedge fund managers. Some financial professionals get compensation taxed as investment income rather than personal income.
- Taxing the exercise of stock options more heavily.
Democrats are also working on a one year delay of sequestration, where cuts would come in March 1, 2014. This would cost $300 billion. Democrats plan to pay for that with a 50-50 split between cuts and revenues, according to White.
If Democrats cannot score a one-year delay, other options include a 3-month extension, a 7-month delay to coincide with the end of fiscal year 2013, or a 10-month delay to get through the calendar year.
The Democrats are considering paying for the delay with some of these revenues:
- Closing the carried interest loophole for $14 billion
- Closing the corporate jet loophole for $4 billion
- Closing oil and gas credits for $21 billion
- Cutting farm direct subsidies for $5 billion
- Closing the S-corp pass through income loophole for $76 billion
- Set a minimum tax rate for millionaires
- Charge higher tax rates for oil and gas companies
- Close the Subpart F corporate income tax loophole
Again, all of these are just proposals that are being considered. None of them are necessarily part of the plan quite yet. Still, it’s a good look at the way Senate Democrats envision offsetting sequestration if contending with political ramifications weren’t a factor.
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