A number of wealthy Republicans, bucking their party’s orthodoxy, say they would be willing to pay higher taxes as part of a comprehensive plan to get the nation’s finances on track.
These Republicans, most of them supporters of former Massachusetts governor Mitt Romney, say they still want to see substantial cuts in federal spending, but believe higher taxes are needed to help bring down the deficit and nation’s ballooning $16 trillion debt, which now exceeds the annual output of the US economy.
“I’m willing to pay more taxes,” said Marshall Carter, former chief executive of Boston’s State Street Corp. and today deputy chairman of the NYSE Euronext stock exchange. “But I’ve got to tell you, I want to see some cuts in government. Way beyond Big Bird.’’
The willingness of prominent Republicans like Carter to embrace higher taxes as part of the solution to a looming debt crisis is particularly significant. Fierce opposition to tax increases by GOP lawmakers has been a major roadblock to reaching a compromise to cut deficits and avoid the so-called fiscal cliff of steep tax increases and deep spending cuts that otherwise go into effect in January.
Many economists say that combination could plunge the nation back into recession.
“Please increase my taxes, but get rid of Obama,’’ said Kevin Landry, a Boston private equity veteran and major Romney campaign donor. Landry said plenty of his fellow conservatives feel the same — though they may not shout it from the rooftops.
“If you offer $1 in tax increases and $3 in spending cuts, and no Obama, you will not find anyone who disagrees,” he said. “At least I have not.”
The views of Carter and Landry echo a rising chorus of business leaders calling for higher taxes as well as spending cuts to reduce the nation’s debt. On Thursday, a group of national business leaders urged Congress to address the nation’s fiscal problems by raising taxes and cutting spending.
Warren Buffett, the billionaire and Democrat, also has urged Congress to raise taxes on the mega-rich, famously noting that his own tax rate is lower than his secretary’s. That spurred President Obama to propose the “Buffett Rule,” to impose a minimum effective tax rate of 30 percent on people earning more than $1 million a year. Most recently, he has proposed rasing taxes for the top 2 percent wealthiest Americans.
Romney, meanwhile, has softened his tax-cutting rhetoric recently, in response to Obama’s charges that Romney is proposing a $5 trillion tax cut for the wealthy. Romney now says he would lower tax rates across the board, but also limit deductions and other tax breaks, so the wealthy would continue to pay the same share of the tax burden.
Many Republicans prefer this approach of cutting deductions, rather than increasing tax rates, which they say would hurt small business owners.
“I like the idea of looking at exemptions,’’ said Robert Reynolds, chief executive of Putnam Investments in Boston. A Republican and Romney backer, he says he is willing to consider tax increases in order to keep Social Security and Medicare well-financed, to avoid a scenario where more seniors become impoverished.
The Romney campaign declined to comment explicitly on its backers being willing to pay more taxes. A spokeswoman, Michele Davis, said, “Governor Romney’s plan is to strengthen small businesses, the engine of growth in our economy, so they can create jobs and put America back to work.”
This readiness to consider higher taxes, in whatever form, is an uncomfortable development for Grover Norquist and his Americans for Tax Reform. The group has gotten Republican office holders and lawmakers, including Massachusetts Senator Scott Brown, to sign their antitax pledge, and promise constituents they will oppose higher taxes. The group declined comment.
Romney has signed the Norquist pledge. But under pressure to explain his tax-cutting plans, Romney since the second presidential debate has said he would not implement a tax cut that would increase the deficit. “I’m not going to reduce the share of income taxes paid by high income people,’’ he said in that debate.
Romney once talked about capping deductions for such things as charitable deductions and mortgage interest at $17,000. The latest plan Romney has floated would lift that cap to $25,000.
The Tax Foundation, a nonpartisan research group in Washington, estimates that Romney’s plan to cut tax rates — with the top rate falling to 28 percent from 35 percent — and cap deductions would not significantly increase the deficit. This conclusion includes the controversial assumption that lower rates would generate additional economic growth and tax revenues.
Scott A. Hodge, president of the Tax Foundation, estimates that the tax shortfall under Romney’s proposal would be just $39 billion a year, “a rounding error by government standards.’’
Limiting tax deductions would effectively apply to people earning over $100,000, according to the Tax Foundation, or about 13 percent of taxpayers. If their rates are lowered at the same time, however, “then they are no worse off,’’ Hodge said.
The wealthiest taxpayers, however, would lose large deductions under Romney’s plan. To put it in perspective, Hodge said, the taxpayer who earns more than $10 million a year claims, on average, $4 million in deductions. Buffett, for example, had more than $25 million in deductions.
Romney “has not settled on anything in particular,’’ in terms of targeted deductions, Hodge said. “What he’s changed is the way in which he’d deal with which tax preferences he would eliminate, while he’s cutting rates across the board.”
Romney’s critics say his proposal to limit deductions represents a shift in position from the Republican primaries, when he promised lower taxes for everyone, including the top 1 percent.
Many of the wealthiest Americans are beginning to accept that they may end up paying more in taxes, even if Romney is elected. They include Tom Stemberg, the founder of Staples Inc. and a longtime Romney backer who can trace his fortune back to the venture capital invested in Staples by Romney’s old firm, Bain Capital.
“It’s pretty clear to me that folks like me are going to pay more,’’ Stemberg said. “And if that’s what it takes to balance the budget, while at the same time one shrinks the size of government, I’m perfectly fine with that.”