Will Republicans buck anti-tax orthodoxy and strike a budget deal? Since election night, they have begun to utter the dreaded “r-word” (revenue). But they have insisted that those revenues come from reducing loopholes — not increasing rates.
Many argue that this stance reflects the power of Grover Norquist and his no-new-taxes pledge. Yet the pledge forbids not only raising rates but also raising revenue by reducing deductions. So why are such reductions O.K. while President Barack Obama’s call for higher marginal rates is not?
Perhaps because the president’s plan would ask far more from the wealthiest Americans. By insisting that rate increases are off the table, Republicans are retreating to a time-honored position: protecting the richest of the rich at the expense of not just the middle class but also affluent households below the top reaches of the income ladder.
To be sure, a deduction cap can be designed to get new revenues mostly from the super-rich. But there just aren’t enough loopholes at the very top to raise big money, especially if the tax break for charitable deductions is spared, as many Republicans (and Democrats) will likely demand.
To get anything close to the president’s target of $1.6 trillion in new revenues over 10 years, the bulk of the money raised by capping tax breaks has to come from those below the very top.