Many have observed that Rep. Paul Ryan (R-Wis.) has done a solid job rolling out his tax plan. As Politico noted, “The party polled on Medicare in 50 battleground districts. It vetted the plan with a dozen conservative groups. It reached out to rank-and-file lawmakers and asked them what they needed to support the sweeping conservative spending plan. Ryan briefed the Republican presidential candidates and won a quick public endorsement of the plan from Mitt Romney.”
The conservative players were lined up: “Groups ranged from monied Republicans like Crossroads, American Action Network and FreedomWorks, to tea party groups such as Americans for Prosperity and American Conservative Union, to Washington establishments like Americans for Tax Reform, the Cato Institute, Heritage Foundation, the American Enterprise Institute. One of the few criticisms came from the Club for Growth, but that group seems to be more the exception than the rule.” (And CFG was criticized by multiple conservative commentators for, frankly, not understanding what the budget did.)
It was therefore a bit surprising when House Majority Leader Eric Cantor, with House Majority Whip Kevin McCarthy, trumpeted a proposal to put in a new tax wrinkle for 2012. Cantor’s plan would “would allow businesses with fewer than 500 employees to reduce their profit subject to taxation by 20 percent in the 2012 tax year at a cost to the Treasury of $45.9 billion over 10 years.” Cantor argued that this is just an “interim measure” while legislators are working on comprehensive tax reform.
The understandable desire to do something now, however, as Ryan is rolling out a very different tax reform vision risks muddying the waters. Tax gimmicks, breaks and credits are, of course, what the House Republicans are vowing to discard in favor of a code with flatter rates and less government distortion of the economy. And we all know that once these tweaks get into the code, it is hard to get them out. Cantor’s plan risks, at the very least, confusing the Republican message carried by Ryan (and Mitt Romney) that we need lower rates and a flatter code.
Today, Cantor’s spokeswoman reiterated to me that “this is a 1 year interim proposal to help small businesses while we look at comprehensive tax reform as laid out in our budget.” But we know that businesses plan more than one year at a time. Be it the payroll tax cut or permanent, comprehensive reform, the GOP has put forth the argument that the promise of predictability so that businesses can make informed decisions is as important as the changes in the code.
Well, they say, Ryan’s tax reform isn’t going to pass this year. But neither is Cantor’s plan. Instead, it may well confuse the issue, giving Democrats the excuse to junk up the tax code with their goodies and claim the GOP isn’t serious about tax reform.
I’m generally a fan of the Milton Friedman admonition that conservatives should be in favor of any tax cut, any time. In its letter of support for Ryan’s plan, Americans for Prosperity hit in on the nose when it praised Ryan’s effort in “usher[ing] in comprehensive, pro-growth tax reform that cuts and aligns individual and corporate tax rates and eliminates special handouts from the overly complex tax code.” That should be the GOP’s unified message. In this case, Cantor, I think, probably should have forgone the opportunity to add one more complication to the tax code.