Friday, February 18, 2011

Chambliss, Coburn, Crapo to Norquist: kowtow or brush-off?

No question, Ramesh Ponnuru is far more attuned than I will ever be to linguistic code of true-blue GOP supply siders. So perhaps I should accept at face value his report (via Sullivan) of this little tax-pledge tango between Grover Norquist and the Republican half of the new Senate gang of six currently in early-stage discussions of a comprehensive tax reform/deficit reduction deal:
After yesterday’s Wall Street Journal reported on work toward a bipartisan deal on the budget, Grover Norquist of Americans for Tax Reform sent three Republican senators a letter noting that the deal, as outlined in the Journal article, would violate their pledge not to raise taxes. The response letter from Senators Chambliss, Coburn, and Crapo strongly suggests that the senators will not support a deal that raises taxes on net. Instead they want a bill that raises revenue only by increasing economic growth.

If you read the letter, though (link above), you might wonder whether Chambliss et al have really promised not to raise taxes "on net."  They do say that the Journal article, which reported that the six were contemplating an (apparently erroneously low) boost in tax revenues, should not be taken at face value. They do intone,  "Like you, we believe that tax hikes will hinder, not promote, economic growth." And they do plead that "we do not believe that our efforts to avert tax increases on hardworking Americans violates any pledge we have taken..." Of course not!  But...

There may be an escape hatch in eliminating "tax expenditures," i.e., targeted tax breaks -- some of which are enjoyed by tens of millions. A focal point of the Bowles-Simpson plan, along with probably every other floated tax reform plan, is to reduce such expenditures, which leaves room to lower marginal rates while still increasing overall revenue. The letter to Norquist seems to pit the beneficiaries of such breaks against "hardworking Americans" (my emphasis below): 
The solution to our economic and fiscal problems will be based on both spending reductions and economic growth. Like you, we believe tax hikes will hinder, not promote, economic growth. And, as you know, the current tax code has become burdensome and complex and filled with provisions which only benefit a limited portion of Americans, at the expense of higher rates for all Americans. Proposals that simplify the tax code, broaden the base, lower all individual and corporate tax rates, and make our corporate tax code more competitive for U.S. businesses will create a surge in economic growth, which, as your website notes, is not only allowable, but greatly desired.

Our pledge is to protect taxpayers, not special interests. To do so we must analyze every aspect of the Federal budget, including the tax code. Contrary to some press reports or the interpretation by some, we do not believe that our efforts to avert tax increases on hardworking Americans violates any pledge we have taken, but rather affirms the oath we have taken to support and defend the Constitution of the United States against all enemies, foreign and domestic, of which our national debt may now be the greatest.  If and when there is a legislative proposal to be presented to Congress and the American people, we look forward to again working with you and all interested parties to support a proposal where any increase in revenue generation will be the result of the pro-growth effects of lower individual and corporate tax rates for all Americans.
Lower rates does not mean lower taxes for everybody. If my rate goes down from 25% to 22%, and at the same time I lose my mortgage tax deduction (or a chunk of it) and my charitable contribution deduction (or a chunk of it), my taxes may go up. Chambliss et al may defend me as a "taxpayer" while clobbering me as a "special interest" (mortgagee, donor).

It's true that the rhetoric is that of supply-siders: tax hikes hinder growth; deficit reduction depends on spending reductions and economic growth. But is there a pledge here not to raise revenue as a percentage of GDP? I think not.

As I noted once before, reducing "tax expenditures" is a concept that both parties can at least potentially get behind (just as, on the other side of the coin, targeted tax breaks have become everyone's favorite form of social/economic action, including Obama's in his current budget).  They can be seen as entitlements; eliminating them can be framed as "cutting spending."  Congress giveth, and Congress taketh away.

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