In his Super Bowl day interview on CBS, President Obama said “I don’t think the issue right now is raising rates. There is no doubt we need additional revenue, coupled with smart spending reductions in order to bring down our deficit. And we can do it in a gradual way so that it doesn’t have a huge impact.” Let us unpack that.
To begin with, it is good to know that he is done raising rates, pleasant confirmation that the fiscal deal did in fact limit the rate hikes under his tenure to the narrowest sliver possible. (Well, that is after House Republicans botched things up by voting no on Plan B, which would have put the cutoff at $1 million.)
Contra Obama, “There is no doubt” that we don’t need more revenue but that Obama wants more revenue precisely so he can minimize spending cuts. That way he won’t make a “huge impact” on the size of government. This is a beautifully clear explanation as to why Republicans need to hold the line on taxes. If they don’t, Obama will keep on spending with abandon.
Obama’s notion that we can raise revenue by closing off deductions, credits and exemptions is laughable. It was the White House that stuffed a bunch of tax “expenditures” into the fiscal cliff deal.
Obama wants to get revenue and close what he calls loopholes. (Mitt Romney and Speaker John Boehner (R-Ohio) have been saying for years there is money in those loopholes!) Republicans want tax reform which lowers rates … and wouldn’t you know, takes away deductions, credits and exemptions. Republican rightly say such a tax reform, as it did in 1986, will spur growth and economic efficiency. So Mr. President, why not support tax reform? Hmmm…
The real reason the obvious deal (lower rates, broader base, more revenue) is unacceptable to Obama is that he is enthralled with the symbolism of imposing high rates on the rich. Tell him they will pay even more under a Simpson-Bowles type tax reform and he’ll scoff. His liberal base wants that big fat marginal rate as a symbol of their class warfare victory.
House Republicans should do two things. First, pass a bill removing Obama’s fiscal cliff tax giveaways. Yes, it would technically be a tax hike but the symbolism is priceless and Republicans should be foursquare against corporate welfare and cronyism. Second, as part of its budget, the House Republicans should put forth in some detail a tax reform plan that flattens rates and does away with exemptions, credits and deductions for the rich. Put that out with a revenue number it will generate (coming from growth) and a breakdown showing how much of the tax burden will be borne by the “rich,” which is now thanks to Obama defined as those making $450,000 and above. And that is it. That is the revenue side. Period. Then House Republicans can turn to entitlement reform.
Obama doesn’t like it? Well, let the Senate pass its own version, send it to conference and then start appropriating. Obama doesn’t get to veto budgets, after all. And if he won’t sign off on real tax reform or the Senate can’t get its act together? I guess we could operate on continuing resolutions until we get a president who will take yes for an answer.