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Right Turn
Posted at 12:35 PM ET, 08/12/2011

The tax fight

Liberal commentators are swooning over the prospect of showing the clip from last night in which all the GOP debate participants said they wouldn’t take a 10-to-1 ratio of cuts to tax hikes. The left should get grip.

Of course, the longing for tax hikes is a liberal phenomenon. The answers were entirely in keeping with the mainstream GOP view that what we have is a spending, not tax, problem. Moreover, we already have a very viable debt-cutting plan without tax hikes: Rep. Paul Ryan’s 2012 budget. He has explained:

“What we want to do is remove barriers to growth. We believe in equal opportunity, upward mobility and economic prosperity based on an entrepreneurial free enterprise climate that helps businesses get created, that helps people get more prosperity.... More to the point, let’s not have a system where we sit in Washington and pile on more spending at the expense of the next generation — at the expense of the credit markets which are getting unstable. Let’s show the world that we can get our fiscal house in order. Spending is the problem. By the time my kids are my age, spending will be twice the share of GDP that it is today. Okay? So let’s deal with the problem. The problem is spending, not taxes.”

However, it would behoove the GOP candidates to make clear what they would favor in the tax area, namely reform. That is part of the Ryan plan as well. As Ryan explained on “Face the Nation” in April:

We’re saying keep tax rates where they are right now. And get rid of all those loopholes and deductions, which by the way are mostly enjoyed by wealthy people, so you can lower tax rates. We’re basically taking a page out of the playbook of the Fiscal Commission. The President’s Fiscal Commission, supported by a majority of Democrats, said the same thing — broaden the tax base, lower the tax rates for economic growth. A simpler, flatter fair tax code more internationally competitive so we can create jobs. That’s what we’re proposing. This isn’t tax cuts. It’s tax reform targeting our revenues at where they are right now.

He continued:

[I]n exchange for losing your deductions, so in exchange for losing the loopholes and deductions that mostly higher income earners use, so what we’re saying is keep tax revenues where they are, don’t lower tax revenues but clean up the tax code so that it works. If you have really high tax rates, what you end up doing is you penalize small businesses. You have to remember, Bob, most successful small businesses file their taxes as individuals. Most of our jobs come from these small businesses. The President is proposing to raise the top tax rate on these small businesses to 44.8 percent. We don’t think that’s good for jobs. We don’t think that’s good for economic growth. . . . So just like the Fiscal Commission, the bipartisan Fiscal Commission said, lower tax rates, broaden the tax base for economic growth and that’s exactly what we’re proposing. . . .
Raising tax rates on anybody, especially successful small businesses slows down the economy, loses jobs. And if you have lower economic growth, you have less revenues, and it puts you further behind. We want more tax revenues, but we want to get it by expanding job creation, by expanding economic growth, so the secret to success here is economic growth and job creation through tax reform, not tax cuts. Tax reform at the same levels get better economic growth.

The other person who made a cogent argument against tax hikes in this economy was President Obama. In a 2009 interview with Chuck Todd, Obama argued that “the last thing you want to do is to raise taxes in the middle of a recession because that would just suck up — take more demand out of the economy and put businesses further in a hole.” In a news conference in December 2010, Obama defended the extension of the Bush cuts. He said that “the overall package was the right one to ensure that this economy has the best possible chance to grow and create jobs. And there is no better anti-poverty program than an economy that’s growing. There is no better deficit-reduction program than an economy that is growing. And if the economy started contracting, as it might have had we not gotten this tax agreement, then the choices that we would have to make would be even tougher.”

To be sure, Obama and the Democrats have always insisted that they are determined to eventually raise taxes. But the argument is not an economic one, as Majority Leader Eric Cantor (R-Va.) pointed out. Taxing the rich is a goal and good until itself, the Democrats have told us. Despite the highly progressive tax code, the rich should just pay more, they say.

Moreover, “sharing the burden” of austerity isn’t really a rationale for their insistence on tax hikes either. Ryan proposed a Medicare plan that would charge the rich more for their health care; The Democrats decried that. Every plan for means-testing Medicare or Social Security has been decried by congressional Democrats. You see, it is not about revenues; it is an underlying fixation with their version, as Cantor put it, of “social justice.” The rich have somehow gotten ahead unfairly, and they need to allow the government to take more of their wealth. (Or even worse, allow the government to “keep more of it,” since the assumption is that we have to bargain to take tax revenue out of the government’s grasp.)

Now, back to the debate. The other reason for opposing any tax hikes at this point is obviously strategic. So long as there is the prospect of more and more tax revenue, the process of restraining the growth of government and achieving real entitlement reform will be impossible. And that is precisely why Democrats cling to the prospect of huge tax increases. It’s what they they need to sustain the giant growth in government.

By  |  12:35 PM ET, 08/12/2011

Categories:  2012 campaign, Taxes

 
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