Rubio: Raising taxes doesn't solve anything

This is a rush transcript from "Hannity," December 19, 2012. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: According to press reports yesterday, Speaker of the House John Boehner is pushing for a deal with President Obama that would include a trillion dollars in entitlement cuts for a trillion in new revenue over 10 years.

Now, here's one catch. What it really means is $400 billion of the revenue now through a tax on millionaires, and only $250 billion of the entitlement cuts will actually happen now. And that will happen through a proposal to slow Social Security growth by using a different inflation formula to calculate cost of living increases, and then a commitment to a process in 2013 that brings the rest of the revenue and the rest of the cuts -- supposedly. I don't trust it.

In addition, Boehner is willing to give Obama a one-year debt limit increase. Obama wants Boehner to raise the nation's borrowing limit for two years which would deny Republicans the leverage they have to force reductions in spending come 2013.

Now, Obama also wants $80 billion in new stimulus spending on quote, "infrastructure" and quote, "unemployment benefits." Now right now, Boehner is arguing that a proposal by Obama that includes 1.3 trillion in revenue for only $850 billion in spending cuts is not balanced.

Now, in any event, that's more or less "Plan A" and it captures the broad contours of a potential deal between the president and Speaker Boehner; a deal that if they can agree to it, they're going to have to sell to their parties. Now, in an indication of how far the negotiations over deficit reduction has shifted just in the past year, now Boehner confirmed that his definition now of a balanced agreement -- well that means an equal amount of spending cuts and new revenues. So, in other words, a trillion in cuts, a trillion in new revenue. He said, most people would agree that that is quote, "balanced." That's what he said.

Now, if you go back to the grand bargain talks with President Obama in 2011, Boehner had insisted on a ratio at that time, a year ago, that was four to one cuts to revenue. You talk about the goalpost being moved. Now, the compromise from Speaker Boehner would be that A, he is willing to increase the rates on some income earners. Now, he wants it to apply to only those making $1 million or more, while Obama, well, he wants it to apply to those making $400,000 a year. By the way, that includes more business.

Two, Boehner is willing to give Obama an increase in the debt limit.

Three, he's not going to get an increase in the Medicare eligibility age, he wanted that from 65 to 67. Now, not only did the president reject that offer, the president just race to the microphones today and he declared that he won the debate with Boehner on tax rates. So clearly, he now wants to humiliate all Republicans, as I predicted.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: I remain optimistic, though. Because if you look at what the Speaker has proposed, he's conceded that income tax rates should go up, except right now he only wants to have them go up for millionaires. If you are making $900,000, somehow he thinks that you can't afford to pay a little more in taxes. But the principle that rates are going to need to go up, he has conceded. I have said, I am willing to make some cuts. What separates us is probably a few hundred billion dollars. The idea that we would put our economy at risk because you can't bridge that gap doesn't make a lot of sense.

(END VIDEO CLIP)

HANNITY: Now, as I have said from the very beginning, the president, he wants the country to go over the "fiscal cliff," and Republicans from the beginning, they have feared this. Now, after all, the president gets to raise taxes on every single American. He gets to gut defense and an added bonus, he gets to blame Republicans.

Now, Speaker Boehner has put forward what he calls "Plan B." Now, that's a bill that would allow tax rates on annual income above $1 million to rise from 35 percent to 39.6 percent, but make permanent lower rates on incomes below that threshold as well as fix the alternative minimum tax.

Now, the president's complaining that taxes will not go up on businesses making $900,000 a year. This president has never been, never will be serious about finding his so-called balanced approach. By the way, I predicted that would be the case.

So, what are we to make of all of this? Let me say this. I am, first of all, disappointed in the Republicans. They were not elected to be a rubber stamp for Barack Obama's agenda. They are the only check and balance against this radical agenda. If the Republicans don't stand up for lower taxes, limited government, less regulations and balance budgets, who will? If they cannot effectively make the moral case against generational theft, who is going to make that case?

Now, going over the "fiscal cliff" is not good for conservatism, and I would argue, it's not good for the country. But neither is agreeing to another bad inside-the-beltway Washington deal. And by the way, stealing from our children and our grandchildren -- that's immoral. Which party now will stand up for them? For our kids? Our grandkids? Which party is going to stop the madness?

Joining me now from Washington with reaction is Florida Senator Marco Rubio. You know, Senator, I am a little frustrated here because this is our one check and balance -- and that case has not been made. What's wrong with making the case that they are the party against generational theft? I think that's a winning issue for any party that makes that case.

SEN. MARCO RUBIO, R-FLA.: Well, Sean, thanks for having me on. It was a very powerful introduction. And you are exactly right. Here's the fundamental problem. Look, I recognize the difficult position that the speaker's in now, because if on January 1st, nothing happens, the taxes go up on everybody, we go over the "fiscal cliff" and all the implications I would have.

But you are right in the point you're making. And that is this, you know, this is the great flaw in all of these arguments the president's making that I wish more people were talking about. If you raise taxes on the wealthiest Americans or what he calls the wealthiest Americans, people making $250,000 or more, if you raise that by 100 percent, that doesn't solve anything. The proposal the president is standing for, it doesn't solve anything. It creates a bunch of problems. And I explained this to someone the other day that I met, someone who works at a law firm and actually said to me, yes, let the taxes go up on the richest people. And I said, well, that may sound great to you. But let me explain to you what that means. That means your boss -- that's corporation, in a single lawyer, single law firm, and I also met someone in the dental clinic with a similar position. If their taxes go up next year by $50,000, they're going to have to find that money from somewhere. And it might be from your benefits, it might be from your hours, it might be from your job.

Those are the people that are going to get hurt by this. And in return, you generate six, seven, eight days worth of government spending. That's not a solution. That's the problem with all this. These tax increases the president wants, it doesn't solve anything, but it does hurt job creation and growing this economy is the only way to solve the real "fiscal cliff," which is a $16 trillion debt that continues to grow and will continue to grow no matter which one of these plans pass.

HANNITY: Why are Republicans afraid to take that issue on, just the way you are articulating it here? In other words, why are they afraid of the "fiscal cliff"? Why are they afraid of saying that we have a spending problem, we don't have a revenue problem?

RUBIO: Well, you know, in fairness, I think the Republicans for the most part want what's good for the country. They're afraid of the impact the "fiscal cliff" would have. The counter argument that I have to that is that the real "fiscal cliff" is not what we are facing now, the real "fiscal cliff" is a $16 trillion debt with no plan to pay for it and an economy that isn't growing fast enough. And that what we should be for is pro-growth strategies.

The only solution to our problem, the only solution is the combination of fiscal discipline and real economic growth. And what the president is proposing, what the president is proposing is neither. There is no fiscal discipline aspect to it. In fact, what the president is proposing does nothing to lower the debt, short term or long term. And it kills job creation and economic incentives and that's where we're headed towards.

HANNITY: We are borrowing, Senator, 46 cents of every dollar, trillion-dollar deficits as far as the eye can see. Sixteen trillion will soon be 20 trillion will soon be 25 trillion. You know, I go back to, I once worked in a boat yard. If you put a luxury tax on boats and people buy fewer boats, who gets hurt? The guys that are building the boat.

RUBIO: Right.

HANNITY: I worked in construction, I worked in restaurants. You take away money from people that have it, they are going to hire fewer contractors, they're going to go on fewer vacations, they're going to spend less money in restaurants.

RUBIO: Right.

HANNITY: Who gets hurt in all those scenarios?

RUBIO: Absolutely.

HANNITY: How did we turn into a country that has such class envy? Where did this all come from?

RUBIO: And that's my point and that's the point I tried to make. Look, it's not the business owner, directly that's going to get impacted, it's the people that work for them that are going to lose their jobs, they're going to lose hours, they're going to lose benefits. The cost of the tax increases will be paid by the workers and the employees of the small businesses.

And here's the other point. And this really exposes the great hypocrisy of the left. They claim that tax increases have no impact on the economy or how people behaved. Well, then why are they in favor of a cigarette taxes? Why are they in favor of a carbon tax? Why are they in favor they say of lowering the corporate tax? Because they recognize that, if you tax cigarettes, people will smoke less. They recognized it that if you tax carbon, people will produce less of it. Tax rates do have -- and the more you tax something, the less people will do it. And so the bottom line is, it does have an impact. It is really going to hurt the workers.

HANNITY: Let me ask you.

RUBIO: Those are the people who are going to have to pay the price of this tax increase.

HANNITY: When President Reagan rhetorically asked the question, is it a third party we need or a revitalized second party. He answered the question, he said, we need a party, not with pale pastels, but bold-colored differences. Did Republicans miss an opportunity here to communicate how their vision for the country is different than Barack Obama's debt, deficit, socialist view of the world?

RUBIO: Absolutely. And I think that's still an opportunity we need to take because this debate's not going to end with this conversation here in December about the "fiscal cliff." The fundamentals, irrespective of what happened on the "fiscal cliff" remain the same. Our economy is not growing fast enough. And the people who are going to get hurt the most by these tax increases are the people that work at the small businesses, who may lose their jobs and their benefits because of what Barack Obama is proposing. We get nothing in return for it. It solves nothing.

HANNITY: The good news is, we have got debates coming up on the debt ceiling, continuing resolutions. There will be opportunities. Will they take a stand? We're going to watch very closely. Senator, good to see you.

RUBIO: We are running out of time.

HANNITY: We are running out of time -- it is a really important time in our country's history. Thank you, sir.

RUBIO: Thank you.

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