Monday, November 19, 2012

GOP on Taxes: The Beat Goes on Same as it Ever Has

     In the previous post we looked at what the GOP has learnt from its election debacle. My conclusion is probably not much in substantive terms. At most we are seeing some old wine in new bottles.

     It's not clear yet that even on immigration we'll see anything meaningful from the GOP. I waiting for Lindsay Graham to put his money where his mouth is.

     On taxes so far what you see is that the GOP now speaks a lot about "revenue." It admits that the President did get some level of mandate by its deigning to use this word a lot. Boehner, McConnell, et. al say they want to raise revenue. Of course their way of getting there is quite different and requires faith in things like "dynamic scoring."

     "Having run and lost on their central anti-tax stance, and with an austerity bomb nearing detonation, Republicans are softening their tone on the issue. But what may appear to be a meaningful shift on taxes among GOP leaders is belied by the unchanged policy specifics within the rhetoric."

     “For the purposes of forging a bipartisan agreement that begins to solve the problem, we’re willing to accept new revenue under the right conditions,” said House Speaker John Boehner (R-OH) in a post-election press conference."

     "That leaves the impression that Republicans are willing to raise revenue by limiting deductions and loopholes. Correct, but they’ve always been open to that — if and only if the new revenue is used to lower tax rates rather than reduce the deficit. Look closer and it’s apparent that that stance is still the same."

      It is the same not only to their previous position but also Mitt Romney's campaign position during the election that has chastened the GOP. So where is the compromise? The compromise is in just using the words "revenue" and "tax reform." They are also invoking the tax deal between Reagan and Tip O'Neil-a deal that is quite overrated. It certainly should not be a model for the Democrats. Indeed, it's not surprising that the GOP loves that deal-it got us pretty close to a flat tax leaving us with just two tax rates at the time-a top of 28% and bottom of 15%.

     Nevertheless, while I think Tip O'Neil mostly got taken to the cleaners in the deals he made with Reagan in 1983 and 1986, there was one major compromise Reagan made in 1986-to raise the capital gains rate to the same level as the income tax rate. Comparatively where has the GOP so far offered even one meaningful compromise?

     Overall, the Dems must be clear that so far there has been no compromise out of the GOP:

     "For Democrats, revenue neutrality negates the purpose of tax reform, which is to help reduce the deficit. If President Obama refuses to back down, Republicans may be forced to swallow a bitter pill on their defining issue. But for now, the change in the way the GOP talks about taxes should not be misinterpreted as a new-found openness to raising them. The policy substance beneath the party’s gentler rhetoric on taxes is the same as it ever was."

     All signs seem to suggest that Democrats have not been snookered. The President has been clear that the Bush tax cut on the top rate will not be renewed. Nancy Pelosi also made a strong statement yesterday:

     "House Minority Leader Nancy Pelosi (D-CA) categorically rejected a fiscal deal that does not raise tax rates on upper incomes, arguing that "just to close loopholes is far too little money."
Asked Sunday on ABC's "This Week" if she'd accept a deal that would hold tax rates constant but cap deductions for high earners, she said, "No."

     "The president made it very clear that there are not enough [deductions] of the sort," she said, calling that approach "a blueprint for hampering our future" because it would require deeper cuts in investments."

     She also is not for cutting entitlements:

     "On potential reforms to safety net programs like Medicare and Social Security, something Republicans are calling for, she said, "If that means harming beneficiaries, I don't think that's such a good idea."


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