Can the debt-deal supercommittee raise taxes?

Who's winning, who's losing, and why.
Aug. 5 2011 6:37 PM

Superconfusion

Democrats say the supercommittee has the power to raise taxes. Republicans say it doesn't. Who's right?

Harry Reid. Click image to expand.
Senate Majority Leader Harry Reid

Harry Reid waited until just moments before the debt deal was approved to hand House Republicans a big surprise.

David Weigel David Weigel

David Weigel is a reporter for Bloomberg Politics

"We need to have a fair approach to this joint committee," he said, closing his remarks about the deal. The new "supercommittee" would have to demand more from "billionaires and multimillionaires," and it would have to look at tax hikes as a way to avoid the "trigger" of automatic cuts. "We've had too much talk these days of saying 'there will be no revenue.' That's not going to happen. Otherwise, the trigger's going to kick in."

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Two minutes before the final vote, and nobody could agree what the key component of the deal actually did. Republicans had wrangled their last "ayes" for the plan by promising that the committee would never, ever succeed in raising taxes. They reiterated as much after Reid's speech, with House Majority Leader Eric Cantor flitting from interview to interview, promising that taxes were supercommittee kryptonite. There were "structural scoring impediments to imposing tax increases," explained Paul Ryan, R-Wis., chairman of the House budget committee. Republicans interpret Ryan's word like tablets brought down from Mount Sinai, so that calmed them a bit.

It shouldn't have. Ryan is right about the politics—more about that later—but misleading about the standards. There is no real restriction on the supercommittee (and we'll have to stop calling it that after its co-chairs are chosen—or after writers run out of Clark Kent jokes) that stops it from raising taxes. There are already ideas out there, CBO-scored and otherwise, that could—emphasis on could—find their ways into the committee's plan. And whatever makes it into that plan gets a glide path through the House and Senate, with no opportunities for anti-tax Republicans or pledged-to-defend-Medicare Democrats to offer amendments.

So what was Ryan talking about? The committee has been ordered to offer a plan that cuts the deficit by $1.5 trillion over 10 years, based on the "2011 baseline" and based on "existing law." Those terms are worth around $3.5 trillion. Why? They refer to the Bush tax cuts that are now scheduled to expire at the crack of midnight on Jan. 1, 2013. Letting those tax cuts expire and doing nothing else gets you far closer to closing the deficit. The new committee has to assume that, then find an additional $1.5 trillion in savings.

But Congress isn't assuming that. Republicans (like Ryan) may write budget plans by assuming the Bush tax cuts will expire, but it's not the policy they prefer. "They view anything higher than permanent present law as a tax hike," explained Ryan Ellis, tax policy director for Grover Norquist's Americans for Tax Reform. "At the end of the day, that's the standard." That's true; that's why Democrats got so much false hope on that magical morning when Norquist seemed to be open to letting the rates expire, thus liberating hundreds of Republicans from their anti-tax pledge.

Don't get too annoyed with Norquist. Many Democrats, Barack Obama among them, don't simply want the Bush tax cuts to expire. Obama campaigned on keeping the rates for people making less than $250,000. Rep. Kathy Hochul, the Democrat who won this spring's special election in New York, floated the idea of keeping the rates for people making under $500,000.

These are all reasons why debt-deal negotiators decided to throw up their hands, create a new committee, and douse it with gamma rays. Congress can't get anything done. Negotiators can't get anything done. Don't even ask if you can push this stuff through the relevant committees.

But tax reformers are dizzy optimists. They see a situation where the Bush tax cuts can't be gimmicked any further; they see an opening. As the debt deal was being hammered out, I listened to Sen. Ron Wyden, D-Ore., and Sen. Dan Coats, R-Ind., pitch their tax-reform plan to the Ripon Society, a group of moderate Republicans. They'd just grappled with the bad news that there would be no "grand bargain" to make tax reform move faster. Republicans just couldn't get out of the no-tax-hikes-ever foxhole.

"If you look at tax reform in the last three weeks, we were almost at the top of the roller coaster," Wyden groused. "There was a period where tax reform made it into the grand bargain [between] President Obama and Speaker Boehner, then it made it into the majority leaders' plan. The Gang of Six included it in their proposal. So it was almost at the top of the mountain—only after about 72 hours, they said, we're for it, but maybe another time."

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