Republicans considering tax increases? No it's just a game of pretend

When Republicans Say They Would Consider Tax Increases, They’re Just Pretending

When Republicans Say They Would Consider Tax Increases, They’re Just Pretending

Moneybox
Commentary about business and finance.
Nov. 4 2011 7:00 PM

The Fake Breakthrough

When Republicans say they would consider tax increases, they’re just pretending.

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House Speaker John Boehner at the Capitol in October

Photo by Mark Wilson/Getty Images.

One hundred people are ready to save America. See here? They said so in a letter. One hundred members of Congress—60 Democrats, 40 Republicans—signed their names to a document that asked the Joint Committee on Deficit Reduction to do something real. Democrats for spending cuts. Republicans for tax hikes. Dogs and cats, living together!

David Weigel David Weigel

David Weigel is a reporter for the Washington Post. 

“To succeed,” they wrote on Wednesday, “all options for mandatory and discretionary spending and revenues must be on the table. In addition, we know from other bipartisan frameworks that a target of some $4 trillion in deficit reduction is necessary to stabilize our debt as a share of the economy and assure America’s fiscal well-being.”

It was announced at a bipartisan press conference. The next day, at their caucus meeting, Senate Democrats were gabbing about it, taken aback by the act of a bunch of congressmen agreeing about something. “Good for them,” said budget committee Chairman Kent Conrad of North Dakota. “Huzzah! That’s what I say to those 100. They’re patriots.”

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Give the letter a quick once-over and it’s like watching hundreds of enslaved soldiers stand up and yell, “I am Spartacus!” to blow off a nosy centurion. Anything that distracts from the current mood of failure and schedule of stunt voters—bring it on. We are 19 days from the first deadline of the joint committee, better and forever known as the “supercommittee.” We’re even closer, two weeks, to the government running out of short-term funding. (The short-term patch, the one we passed to avoid a shutdown in May, was necessary because no full-term budget has made it through since April 2009.)

When we’re this close to two Armageddons, what does all the “grand bargain” talk mean? It behooves a lot of people in Congress to talk about a “grand bargain” right before they rule it out. That’s progress! There’s a robust fatigue and panic wearing down the resistance of people who have pledged never to raise taxes. They’ve grown slightly embarrassed about defending themselves. But only slightly. Look closer at what the Republicans in the supercommittee are saying, and what even the brave 40 Republicans of the Patriotic 100 are saying. They’re as wedded as ever to tax cuts and low rates.

The Republicans who put their names on that letter didn’t say they were endorsing tax hikes. “I specifically asked about that in the meeting,” said Rep. Lee Terry, a conservative Republican from Nebraska who has never voted for tax increases. “I said, does this commit me to raising taxes? And Stephen LaTourette (of Ohio, one of the brains behind the letter) said, ‘No. This just says revenues.’ That could mean spectrum fees, or something like that. It doesn’t commit me to raising taxes.”

Spectrum fees; well, that’s something. If the supercommittee tackles them, it’s bucking the cable industry and dissing two lobbyists who used to be members of Congress, Steve Largent and Gordon Smith. But compare the money you could raise from that with the revenue you could raise from—to pick an idea completely at random—letting the top-rate Bush tax cuts expire. It’s a difference between perhaps $16 billion (that would be the spectrum fees) and perhaps $700 billion (that would be the expiration of the tax cuts).

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A real breakthrough in debt negotiations would look something like that. Democrats have offered to give away trillions in discretionary spending cuts and entitlement cuts in exchange for $1.3 trillion in tax revenue, for overall savings of $4.1 trillion. That’s what it sounded like the Hardy 100 were ready to buy. The most concrete Republican offer so far: Plenty of cuts, and only $40 billion in real revenue increases.

So what do the doubting Republicans actually want? Rep. Jack Kingston, a Georgia Republican with spotless conservative cred, signed on to the letter, too. He meant it as a suggestion: Guys, be serious and do tax reform.

“I believe we need to get rid of the underbrush,” he said. “Some of these loopholes. The best way to do that it with a tax code that’s half an inch deep and miles and miles wide. We want clarity in it, and we want equity.”

What kind of equity? “It galls me when I hear about a major corporation or a very wealthy individual not paying taxes,” he said. “But at the same time, when you hear about 50 percent of the population not paying taxes, that galls me also.”

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This really is an evolution in how Republicans think about taxes. Strike that: Not in how they think about them, but in how they talk about them. With the year they’re having, and especially after the debt-limit brinkmanship that they won on points but lost on PR, Republicans don’t want to make it look like they’re inflexible on taxes. (Surely, this was part of the reason that Speaker John Boehner whiffed a question this week about whether Grover Norquist was “good for his caucus.”)

How to stay frosty on taxes without sounding inflexible? Talk about tax reform. That’s what Herman Cain and Rick Perry have been doing in the primary states. It’s what the supercommittee’s Republican diehards are doing, too. Sen. Pat Toomey, the freshman Republican from Pennsylvania, has used all of his time on the dais to talk up tax reform. Rep. Dave Camp, the Ways and Means Committee chairman who actually guards one of the gates to tax reform, has proposed a corporate tax reform that would lower that tax rate, now at 35 percent, and end taxes on foreign profits.

Why is it so hard to find revenue this way? The Bush tax rates are set to expire at the end of 2012. That’s what happens if no one does anything, which is always a safe assumption in Washington. It’s also an assumption that allows you to come up with a tax reform plan in which more revenue starts rolling in right away. But Republicans don’t make that assumption. In fact, they assume the opposite. “I always work on the assumption that they’ll be permanent,” explained Terry, referring to the tax cuts. “If we do tax reform, the new bracket would assume those savings.”

That’s not the only problem in the Great Grand Bargain hunt. It’s just the most intractable. Republicans are changing how they talk about taxes. Long gone are the days when they could look intractable and get away with it. That’s progress, sort of. It’s not the progress that gets us closer to a deal.