All-Star Panel: Who will win tax rate battle?

This is a rush transcript from "Special Report," November 12, 2012. This copy may not be in its final form and may be updated.

BRET BAIER, ANCHOR: Well we have 50 days of that to come. A.B., the fiscal cliff, you hear the line in the sand already. Tax rates, revenues -- we hear the words, the buzz words. So can Democrats be happy with closing loopholes and not raising the top tax rates? Can Republicans be happy if the cuts are not significant in entitlement reform before the end of the year?

A.B. STODDARD, ASSOCIATE EDITOR, THE HILL: Well, the numbers have to add up. So it's going to depend on what kind of numbers you are looking at. If enough deductions are eliminated and capped and you find enough revenue perhaps you can avoid --

BAIER: Can you do it?

STODDARD: -- a rate cut. People are speaking very generally as you notice now.

BAIER: Yes. It's amazing how Governor Romney did that he really didn't go over too well.

STODDARD: People are being very generic about this because they're still -- what they want to do right now is speak past each other and say we are willing to cooperate and we are willing to compromise. And then they double down on their position in the same sentence because it's a starting point for negotiations. So you don't bring your end point to the negotiation.

So we're going to hear this and there is not going to be any movement until after Thanksgiving. But we -- what you hear from Republicans is no movement on rates. But they are willing to find revenue in other places.

What Democrats have not done is offer what they would put in exchange for the sequester cuts on the table. We haven't heard anything about that. They might think taxing millionaires is going to get you there, but it doesn't sound like it.

BAIER: Sequester cuts, the across the board cuts, including defense cuts that many lawmakers have a real problem with -- both sides of the aisle.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: In contradiction to one of my colleagues, I think Republicans have to hold the line on something and that is on rates. Liberals are congenitally unable to understand the difference between raising rates and raising revenues. And Republicans have to stand on that, because if they give in on rates they're going to get rolled. It will be a rate here for just a millionaire here. Remember how the alternative minimum tax started in the late 60's, it was aimed at what, 600 millionaires? And now it gets tens of millions of people in its net.

So, I think they have got to hold the line. Obama has a mandate, but the Republicans who had the largest success in 2010, the largest gain of seats since the late 40's, also have a mandate, and I think that is to hold the line on rates. It makes no sense at all to raise rates which will retard economic growth when you can eliminate deductions, which are unfair and inefficient.

BAIER: OK, Bill you got a lot of ink for something you said on "Fox News Sunday" yesterday. And we had to go back to the archives just to pull up something else. And we wanted to play both things back to back.

(BEGIN VIDEO CLIP)

BILL KRISTOL, EDITOR, THE WEEKLY STANDARD: The administration is going to raise taxes on those who pay the majority of taxes in this country, on the wealthy and on those who have dividends and interest income, dividends and capital gains income. That is one of the stupidest things you can do in the middle of a deep depression where everyone is pulling back and no one wants to invest.

KRISTOL: Let's have a serious debate. Don't scream and yell where one person says, you know what, it won't kill the country if we raise taxes a little bit on millionaires. It really won't, I don't think. I don't really understand why Republicans don't take Obama's offer to freeze taxes for everyone below $250,000.

(END VIDEO CLIP)

BAIER: All right, there you have it.

KRISTOL: So there are two separate points. The Bush tax rates expire on December 31st. Rates are going up for everyone if nothing happens. If you think Republicans can win a showdown on preserving all the current Bush tax rates against a president who was just re-elected and gained seats in the Senate and the House on just raising rates on millionaires, well, good luck. I prefer this as a policy outcome. I don't think it's winnable. I think at the end the Republicans will cave.

The question for me is, do you cave right now, get it out of the way, four percent, do it for a year if you want, just for a year but full tax hike on the millionaires. Get it out of the way so we can fight about tax reform; so we can fight about the big deal that has to happen next year. Or Republicans are going to cave on December 29th in my view.

Secondly, as an actual empirical matter, what were the four fastest years, I think, of economic in the last 30 years. I think '83 to 86 under Reagan.  What were the top marginal tax rates? 50 percent. Honestly, 35 to 39 percent by itself is not going to cripple the economy.

It's President Obama's proposal. He ran on it. Let him implement it.  If things slow down it's his fault, and that's fine with me. And I hope things don't slow down because I hope we get real tax reform in 2013. But I just think picking the fight right now on the expiring Bush tax cuts is a mistake.

BAIER: Alright, I'm pulling the archive tape for you next, Charles.

That's it for the panel, but stay tuned for a special Veterans Day close to our program. 

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