Taxes and the Super Committee

Senator Chuck Schumer (D-NY) seems pretty convinced that the Super Committee is going to fail and the blame will fall with the Republicans. As he predicted recently:

“I don’t think the Super Committee is going to succeed because our Republican colleagues have said ‘no net revenues…When Democrats move too far left, we lose. We’re now — the basic mainstream of Democrats…we’re willing to move to the middle,” Schumer said. “They are not willing to do any revenues.”

There is news, contra Schumer, that Republicans on the Super Committee may be willing to accept some tax increases (or revenue enhancements, if you will). As NPR reports:

GOP aides said Tuesday that a plan floated by Republicans, including Tea Party favorite Sen. Pat Toomey of Pennsylvania, is one that would place sharp limits on the total amount of tax deductions and credits that a person could claim, in exchange for significantly lower income tax rates. At the same time, Republicans are willing to accept an about $300 billion net increase in individual income tax revenues.

Eliminating tax expenditures would simplify the tax code while reducing the role of the “hidden welfare state.” Despite the fact that the largest tax expenditures overwhelmingly benefit top earners, the Left so often opposes cutting expenditures (except those for “big oil,” of course), and fetishizes marginal rates. As the story notes: “Aides to supercommittee Democrats pushed back sharply, saying the GOP plan for a top individual tax rate of 28 percent would give wealthier earners large tax cuts while many middle income taxpayers would lose tax deductions important to them.”

Given the long-term debt problems, I am hesitant to support cutting marginal rates at this point. But one thing I know for certain, if you raise marginal rates without cutting tax deductions, credits, etc., you only increase the incentives for tax avoidance and the ultimate impact on revenues. Congress could claim that it had finally created jobs. Alas, they would be for accountants and tax attorneys.

I have to wonder (1) whether Toomey et al are serious about tax reform or simply engaging in tactical maneuvers; (2) whether any package that included tax increases would be DOA in the House and Senate, and (3) whether forced sequestration would prove more appealing to a majority of House Republicans than tax hikes without meaningful entitlement reform.

The next few weeks should provide answers to these questions.

2 thoughts on “Taxes and the Super Committee

  1. Here’s my take:

    1. Tactical maneuvers
    2. Definitely DOA
    3. Sequestration won’t happen. Republicans will insist defense spending isn’t touched otherwise the world will end. Democrats will say, “ok, let’s ‘support the troops'” but will insist entitlement spending isn’t cut as part of the deal. So Congress will just nullify all the cuts and we’ll right back where we started in August.

  2. Call me a cynic if you will.

    Given: it is highly likely, and expected, that the Super Committee will fail at their assigned task:

    a. Shumer shows us the Democrat’s plan to lay the blame for this failure at the feet of the Republicans based on the GOP’s recalcitrance to accept revenue increasing measures

    b. Republicans propose a revenue increasing scheme that they are certain the Democrats will never accept, demonstrating their willingness to accept tax increases and thereby deflecting blame for the failure.

    So, neither is now interested in working toward success, rather each is fully focused on making sure the blame falls to the other.

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