Republican support for Senate Democrats’ plan to prevent an interest rate-hike on federal student loans will depend on how anti-tax zealot Grover Norquist feels about it, the top Senate Democrat said Tuesday. President Obama last week began pushing Congress to act on student loan interest rates, which will double in July if Congress doesn’t act. Senate Democrats will unveil a plan this week that pays for the extension of the lower rate by closing a loophole that allows certain businesses to avoid payroll taxes by gaming the tax system.
Closing the “John Edwards loophole,” named after the former senator who used it while practicing law, would raise enough revenue to offset the $6 billion cost of extending the current interest rate. But Senate Majority Leader Harry Reid (D-NV) sounded pessimistic about garnering Republican support yesterday, saying the GOP would take its cues from Norquist, who opposes closing loopholes to raise new revenue, before deciding whether to support it, the Las Vegas Sun reports:
“I think the proper question is, is it something Grover Norquist would accept,” Reid said, invoking the author of the anti-tax pledge to chide his opponents’ unwillingness to raise taxes. “He seems to be the marker for Senate Republicans. We’ll see.”
If Republican reaction today is any indication, Norquist hasn’t given his blessing to the Democratic plan. Minority Leader Mitch McConnell (R-KY), who says he supports the extension, blasted the plan on the Senate floor today, saying it would “raid Social Security and Medicare” while “making it even harder for small businesses to hire”:
MCCONNELL: Democrats want to pay for it by raiding Social Security and Medicare and by making it even harder for small businesses to hire. We happen to think that at a time when millions of Americans and countless college students can’t even find a decent job it makes no sense whatsoever to punish the very businesses we’re counting on to hire them. It’s counterproductive and clearly the wrong direction to take.
McConnell’s argument that the plan would undermine Medicare and Social Security makes no sense — though the taxes raised from closing the loophole would normally be directed toward those programs, they are not going there currently because they are not being collected at all.
Closing the loophole, as Citizens for Tax Justice explained in 2010, would actually benefit small businesses and individuals, leveling the playing field for those that don’t game the tax code to lower their rate. “When some small business owners avoid taxes, honest taxpayers make up the gap by paying higher taxes,” CTJ wrote. “Lawmakers who are concerned about the tax burden of small businesses need to do everything possible to close loopholes in the tax code so that all Americans pay their fair share.”