WASHINGTON -- Congressional Republicans' opposition to any tax rate hike on the top two percent of earners shows few signs of letting up as the debate wears on. But the beneficiaries of that opposition, the nation's wealthiest executives, have themselves begun opening up to the possibility of a rate hike.
On Tuesday, FedEx Chairman and CEO Fred Smith, an adviser to Sen. John McCain's presidential campaign, said that the notion that tax hikes on the richest Americans would kill jobs was simply "mythology."
And on Monday, a gathering of the nation's top defense executives took a surprising turn when they endorsed tax rate increases on the wealthy and cuts of up to $150 billion to the Pentagon's budget. Top executives from Northrop Grumman, Pratt & Whitney, TASC and RTI International Metals appeared at the National Press Club at an event organized by the Aerospace Industries Association, the top defense contractor lobbyist.
David Langstaff, CEO of TASC, said that the executives were speaking out because so far leaders of the defense industry were "talking a good game, but are still unwilling to park short-term self-interest." After the event, he told a defense reporter for Politico that tax rates need to go up.
“In the near term, [income tax rates] need to go up some,” Langstaff said. "This is a fairness issue -- there needs to be recognition that we’re not collecting enough revenue. In the last decade we’ve fought two wars without raising taxes. So I think it does need to go up.”
David Hess, head of Pratt & Whitney, said his parent company, United Technologies Corp, believed personal income tax rates should be on the table; Dawne Hickton, CEO of RTI, said he would back a rate hike if it led to a deal.
The CEOs join other high-profile executives who are willing to chip in more. Following a meeting with President Barack Obama last week at the White House, executives emerged to endorse higher rates. "There needs to be some revenue element to this, and [Obama] started with rates," said Joe Echeverria, CEO of Deloitte LLP. "And he started with rates on what we would define [as] the upper two percent … that we have to pay our fair share. And I think everybody was in agreement with that notion."
AT&T CEO Randall Stephenson, who was also at the meeting, said in a statement that a deal "will require a compromise involving an increase in both tax rates and revenue."
Goldman Sachs Chief Executive Lloyd Blankfein, meanwhile, told CNN after the meeting that "if we had to lift up the marginal rate, I would do that."
When asked Wednesday about increasing support among wealthy executives for higher taxes on the rich, Republicans on Capitol Hill showed no signs of letting up.
Sen. John Thune (R-S.D.) said he had not heard the CEOs' remarks this week but insisted he would not support rate increases. He would rather see revenue generated through capping deductions, he told The Huffington Post.
"The reason deductions is a more attractive way to do this is because it doesn't hit small businesses nearly as hard as rate increases do," Thune said. "That is a concern to me, because ultimately what we need to be thinking about is economic growth. Do our policies inhibit or facilitate economic growth? And rate increases on small businesses are going to be counterproductive in terms of growing the economy and creating jobs."
Sen. Marco Rubio (R-Fla.) struck a similar chord with respect to rates, saying he would not support any deal allowing tax rates for the top two percent to expire.
"I'm deeply concerned that raising rates or further complicating the tax code is going to make it harder for us to generate the revenue we need to get out of this hole that we're in," Rubio said in an interview. "To me, it's not about a pledge -- it isn't about protecting millionaires and billionaires. It's about creating new taxpayers, because that's the only way we're going to get out of this."
But Sen. Dan Coats (R-Ind.) was slightly more flexible. While he reiterated the need for comprehensive tax reform, the senator acknowledged that he did not think restructuring the tax code would be possible before the end of this year, when the Bush-era tax cuts are set to expire.
"It's very hard to see that we can get that done in a quick two to three week process here. So I'm hoping that whatever comes down will have enforceable instructions that certain goals must be reached through comprehensive tax reform at a date certain in 2013," Coats told HuffPost. "To cherry-pick right now on tax would be -- what we'd have to do is come back and revisit and revise, and we need more certainty."
Sen. John McCain (R-Ariz.) said he did not want to deal in hypotheticals, but added that he has been considering the opinions of a wide variety of sources. Asked about executives expressing a willingness to see their rates go up, he responded, "I am always glad to receive advice … I can't speculate on what might happen, [but] I have some confidence in the Speaker and Sen. McConnell in arriving at a resolution."
Still, some Republicans have broken with their party and indicated their support for accepting President Barack Obama's proposal to extend tax cuts only for the first $250,000 of income. Last week, Rep. Tom Cole (R-Okla.) urged fellow Republicans to agree to the president's tax plan, and since then a number of Republicans have made similar statements, including Sen. Olympia Snowe (R-Maine.), Sen. Tom Coburn (R-Okla.), Rep. Kay Granger (R-Texas) and Rep. Robert Dold (R-Ill.).
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Posted: 12/05/2012 2:38 pm EST Updated: 12/06/2012 10:40 am EST