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February 26, 2013 3:07 PM When Did “Tax Reform” Become a Tax Hike?

By Ed Kilgore

One of the issues baffling non-conservatives in assessing the latest stage of the fiscal conflict in Washington is that Republicans are treating Democratic demands for loophole-closing on the wealthy exactly like it’s a tax rate increase. That’s odd, since it’s Republicans who have continuously injected loophole-closing—or as they usually call it, “tax reform”—into the debate. For years they’ve discussed it as a possible way to finance a revenue-neutral tax rate cut. Paul Ryan made it (or at least a very vague version of it) central to the math and marketing of his various budget proposals. During most of the 2012 campaign, Mitt Romney touted “tax reform” in the more traditional way, as a magic asterisk that would both limit revenue losses from the tax rate cuts he was proposing, and would also (even less plausibly) prevent his overall plan from changing the distribution of the tax burden. After the election, “tax reform” became part of the package Republicans supported as a “fiscal cliff” measure to maintain all the Bush tax rate cuts.

But Republicans have always been reluctant to talk about tax reform if it’s used for any purpose other than reducing tax rates or avoiding higher tax rates, even though conservative economists tend to support loophole-closing as an efficiency measure worth taking in isolation from rate changes.

So once the battle over tax rates ended (temporarily) with the so-called “fiscal cliff” agreement, Republicans quickly declared not just tax rates but any additional revenues as off-limits in future agreements. So even though you’d think they’d be at least as open to a tax-reform-for-entitlement-reform deal as they were for a tax-rates-for-entitlement-reform deal last year, that has not been the case. It’s tax rates that continue to drive GOP tax policies, even in the absence of any real chance that they will soon be raised or lowered.

Here’s how Jonathan Chait explains what he calls this “reversion to form:”

The answer to this piece of the mystery is clear enough: Republicans in Congress never actually wanted to raise revenue by tax reform. The temporary support for tax reform was just a hand-wavy way of deflecting Obama’s popular campaign plan to expire the Bush tax cuts for the rich. Conservative economists in academia may care about the distinction between marginal tax rates and effective tax rates. But Republicans in Congress just want rich people to pay less, period. I can state this rule confidently because there is literally not a single example since 1990 of any meaningful bloc of Republicans defying it.
What has aided the easy reversion to form, with low taxes for the rich dominating all other considerations, is the pent-up rage and betrayal John Boehner has engendered among his most conservative members. Almost nothing Boehner has done since taking over as speaker has endeared him to his ultras. Every subsequent compromise creates more embitterment, and the last few moves have provoked simmering rage.
Conservatives had to swallow a tax hike, and then swallow an increase in the debt ceiling. Boehner has, incredibly, had to promise his members that he will not enter private negotiations with Obama.
The pressure for confrontation as a method has built up to the point where seemingly no deal Boehner could reach would leave him safe.

So Republicans aren’t open to the tax reforms they’ve supported in the past, or to entitlement reforms they’ve been demanding for years (though this particular issue is complicated by the fact that they only want “entitlement reforms” if they significantly reduce actual benefits; anything else can’t possibly be a “reform”). They have truly painted themselves into a corner this time, and that’s why we are going to have a sequester followed quite possibly by a government shutdown if Democrats resist making the domestic spending part of the sequester permanent.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • Josef K on February 26, 2013 3:33 PM:

    They have truly painted themselves into a corner this time, and that’s why we are going to have a sequester followed quite possibly by a government shutdown if Democrats resist making the domestic spending part of the sequester permanent.

    Let that sink in for a moment: half our political establishment is willing, in the name of an ideology most of them likely can't even spell out with any coherence, to effectively crash both the economy and the federal government into the side of a cliff. And then pour gasoline on both and light a match.

    The absolute worst part is that I suspect this "corner" that they've painted themselves into is exactly where they wanted to end up. Not because they're natural sociopaths or nihilists, but simply because they don't understand this will hit them as well. They're innocents in their own way, not comprehending how interwoven the world is and likely not caring.

    At least that's my read on it. Anyone else want to have a go?

  • boatboy_srq on February 26, 2013 4:04 PM:

    The answer to this piece of the mystery is clear enough: Republicans in Congress never actually wanted to raise revenue by tax reform. The temporary support for tax reform was just a hand-wavy way of deflecting Obama’s popular campaign plan to expire the Bush tax cuts for the rich. Conservative economists in academia may care about the distinction between marginal tax rates and effective tax rates. But Republicans in Congress just want rich people to pay less, period.

    Chait absolutely nailed it with that. "Tax reform" sounds delicious to all the volk who are being taxed out of house and home, but never seems to do anything except create more loopholes for more 1%ers to shield wealth. The Teahad is (as has been said elsewhere) incensed over paying the lowest income taxes in a generation, in no small part because income taxes are only part of the burden, and because if the tax were one cent per taxpayer it would still be too high to some.

    As for Boehner, I'm eagerly awaiting the next ballot for Speaker. It would be interesting - and fun - to get Pelosi back, since it's likely the Teahad would "primary" Boehner, and no GOTea congresscritter up for the gavel would get a higher percentage than Pelosi.

  • JM917 on February 26, 2013 4:17 PM:

    @ Josef K, re:

    "The absolute worst part is that I suspect this "corner" that they've painted themselves into is exactly where they wanted to end up. Not because they're natural sociopaths or nihilists, but simply because they don't understand this will hit them as well. They're innocents in their own way, not comprehending how interwoven the world is and likely not caring."

    Why not acknowledge that the TeaOP and their vocal base are indeed "natural sociopaths" and "nihilists"? The most credit I'll give these folk is that they're too stupid and too blinded by their ideology to understand that everything they advocate and stand for is, by any reasonable definition, sociopathic and nihilistic.

    It's who they are.

    As for the broader numbers of voters who send these nihilistic sociopaths to represent them in Washington, pure stupidity is probably the explanation.

  • c u n d gulag on February 26, 2013 4:26 PM:

    Talk about "tax reform" was fine, until President Obama and the Democrats started talking about "tax reform."

    Then, any talk of "tax reform" had to be taken off the table, since the Democrats and Liberals seemed to be for it.

    Here, today, is what modern Conservatism stands for:
    Any and every thing that Democrats and Liberals might possibly be for. And for anything that they're against!

    And, if this causes the Conservatives to do series of 180's several time a year, month, week, day, or even hour, well, isn't that what God invented anti-nausea medicine for?

    Yes, the Republicans and Conservatives are sociopaths and Nihilists!
    But hardly consistent ones, at that!

    They believe in nothing - except tax breaks for the richest and corporations. Everything else, is based on opposing the things that people outside of their sphere
    might be for.

    They can never tell you what they're for, except the two things above, but they can always tell you what they're against - all they have to do, is take a look at what everyone who is not them, wants to do.

  • Bloix on February 26, 2013 4:51 PM:

    "Conservatives had to swallow a tax hike,"

    Really? I thought that the Bush tax cuts, which were about to expire, were extended indefinitely except for a tiny fraction of the ultra-rich. It was one of the largest tax cuts in history.

    And now we have even liberal pundits calling this a tax hike.

    The decision not to allow the country to "go over the fiscal cliff" and then to propose "the Obama tax cut" the very next day was just one of the dozens of self-inflicted wounds of this administration.

  • JR on February 26, 2013 5:13 PM:

    I'm convinced that if Obama suddenly announced that he'd be willing to scrap SSI/Medicare/Medicaid, in order to close the deficit, many in the GOP would cry: "Not enough!" The major truth that MSM refuses to properly report is that as long as Obama's name is on it, the GOP won't pass it. Also their cry that, unless something totally wipes out the deficit, it's not good enough. As they're dying in the desert, they're refusing a canteen because it's only half-full.

  • Peter C on February 26, 2013 5:50 PM:

    Republicans bring up ‘closing loopholes’ for the same reason that a mother bird pretends to have a broken wing as she hops away from the nest. Loopholes are offered as a distraction from the real prize of tax rate increases, knowing that (just as the mother bird will regain her full ability to fly when the predator has moved sufficiently far from her eggs) the loopholes will prove ‘too important to key constituents’ for them to be included in the ‘shared sacrifice’ produced in the backroom sausage-making legislative process. The Republicans were never serious about closing loopholes; that’s why they always failed to name specific loopholes they would close. They were just pretending to offer them as a ruse.

  • emjayay on February 26, 2013 11:00 PM:

    All right, maybe, but they definitely did have a well thought out comprehensive health care plan that would benefit all Americans all ready to go if RomneyRyan won and they got to "repeal and replace" Obamacare, didn't they?

  • jonh on February 27, 2013 10:41 AM:

    Let me second Bliox's frustration at surrendering to R framing of the fiscal cliff deal.

    At the same time, the expiration of the payroll tax cut was not characterized as a tax hike.

    Obama isn't blameless either, as he/his administration claimed that the deal would not increase the deficit.

    Maybe we need some confucian 'rectification of names'. From Wikipedia: "Confucius believed that social disorder often stemmed from failure to perceive, understand, and deal with reality."

    Ya think??