James Pethokoukis

Politics and policy from inside Washington

Why the GOP shouldn’t cave on taxes

April 25, 2011

Let me start off by saying I have no doubt that Sen. Tom Coburn wants smaller government — much smaller government. But is giving more money to government — and hoping against precedent that Washington just doesn’t spend the new cash –  the best way of doing it? Here is a bit from his Meet the Press interview yesterday:

GREGORY: Let me stick with you on the point of contention, particularly with senators like you, Republicans, conservatives, and outside groups having to do with taxes. Could you support a deal here out of this Gang of Six on the budget that includes tax increases?

COBURN: Well, we’re not talking about it. I think if you go back and look at the commission’s report, what we were talking about is getting significant dynamic effects by taking away tax credits, lowering the tax rate and having an economic increase that will actually increase the revenues to the federal government. We’re not talking about raising tax rates at all. … So if there is a net effect of tax revenue, that would be fine with me. I experienced that during Reagan’s period in 1986.

Except that we’re not just talking about more revenue from economic growth. Coburn’s Gang of Six would reduce various tax breaks and loopholes so that taxpayers would be supplying more revenue to Washington.  Apparently Coburn believes this is a price that must be paid to get a debt reduction agreement with Democrats.

But what exactly would spending hawks get in return? Are Democrats offering to dump Obamacare or agree to a revamp of Medicare like the one proposed by Paul Ryan. Highly unlikely. If that were the case, Coburn would have a much stronger arguement. If not,  a better compromise might be lower defense spending in exchange for other cuts discretionary or mandatory spending.

And remember the context: The reason America is on an unsustainable fiscal track is that spending, not revenue, is moving away from the historical average.

Comments

So the GOP shouldn’t “cave” on fixing loopholes that allow the ridiculously rich to cheat on their taxes unless the Dems agree to take healthcare away from the middle class or the elderly? Great plan.

Posted by 4ngry4merican | Report as abusive
 

Tax rates are at their lowest since the 1940s and you’re telling me revenue is average? Yeah, right. Supply your evidence an maybe someone will take your statements seriously.

Posted by Ralphooo | Report as abusive
 

James, are you just a shill for the Heritage Foundation and American Enterprise?

Total tax burden on middle income Americans is now in excess of 50% if you include all taxes: Federal, Social Security, Medicaire, state and local income and/or sales, excise taxes, and esp. real estate taxes. This is no exaggeration. Just add them up one by one.

However, if you make $10million in dividends your Federal tax rate is 15%. No social security tax, and you probably get tax abatements galore for your companies, real estate, etc. Just look at all the states giving corporations and real estate developers tax abatements for just staying in their locales.

Your final statement is so wrong. The fiscal mess in the USA is due to the dwindling tax revenue from corporations and the upper 1%. Of course, waging 2 wars with tax cuts and bailing out Wall Street with no tax increases is doing huge damage.

Simple solution to this mess: 2% Wealth Tax on net worths over $10million (include all persons, companies, trusts, foundations, etc.). Keep this tax until the deficit is gone and the US debt is paid off.

Posted by Acetracy | Report as abusive
 

Ralphooo,

Your evidence:

http://www.deptofnumbers.com/blog/2010/0 8/tax-revenue-as-a-fraction-of-gdp/

Tax rates and tax revenues are different animals.

Posted by deregulator | Report as abusive
 

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