Tuesday, November 27, 2012

Add the Anti-Tax Pledge to the Mayan Prophecy

Fiscal cliff, taxmageddon, you'd think Washington, DC was about to slip into the abyss of the Mayan prophecy. But rather than the world ending on December 21, 2012, the U.S. Congress will probably just take its usual Christmas vacation.

Will they have a deal? Won't they have a deal? A lot is being made to depend on whether enough Republicans break the Grover Norquist Americans for Tax Reform Pledge not to raise taxes. Here's why you should add that to the list of things you don't really need to follow:

The Pledge is toothless. How toothless? Well just compare the Pledge asks from U.S. Senators and Congressman to the Pledge he asks from state legislators:
State: "I pledge that I will oppose and vote against any and all efforts to increase taxes."

Federal: I pledge that I will ONE, oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates."
Anyone can plainly see the big gaping difference between "any and all efforts to increase taxes" in the state pledge and that mishmash of words in the federal pledge. The U.S. Congress can pass any tax in any amount it wants without breaking with Grover Norquist, as long as it's not a "marginal" income tax rate increase or a "net" reduction in deductions and credits.

Any real promise to hold spending in line so taxes won't have to be raised has already been broken. We've already run up $16 trillion in debt under the not-so-watchful eye of the Pledge. Since deficit spending = future taxation we've already decided to raise taxes. When and how is just a detail.

Consider this. The Bush tax cuts were extended from their original expiration date of 12/31/2010 to expire on 12/31/2012. Would letting them expire and thereby allowing tax rates to rise on 1/1/2013 break the Pledge? Grover Norquist didn't seem to think so in July 2011:
"Not continuing a tax cut is not technically a tax increase."
If Republicans can just let the tax cuts expire without breaking the Pledge, then they can also agree to set the income tax rates on 1/1/2013 at any level up to the higher rates that would otherwise apply. They don't have to wait until 1/1/2013 to make such a deal and exempting even one person would make it a "tax cut."

The so-called Buffett Rule doesn't break the Pledge. Warren Buffett's latest version is for Congress to enact a minimum tax on high incomes at 30 percent of taxable income between $1 million and $10 million and 35 percent on income above that. That's less than the current top marginal income tax rate of 35% so no Pledge to break here folks.

The Pledge doesn't even have enough adherents to stop a tax increase. The Democrats have a majority in the U.S. Senate along with 6 Republicans who haven't signed the pledge and a few others who say they don't feel bound by it any longer. Grover Norquist can't even mount a filibuster. In the U.S. House, only 17 Republican votes are needed to go with the Democrats and at least 16 Republicans declined to sign the Pledge with several others publicly ready to sign off. As long as Republican Speaker John Boehner and Majority Leader Eric Cantor are on board the deal, it can't be stopped in the U.S. House.

So don't worry, Pledge or no Pledge, President Obama and the U.S. Congress will save us from going off the fiscal cliff and into taxmageddon, they just haven't decided whether to "save" us before we reach the precipice or "catch" us on the way down. This is just Daylight Savings Time. The extra hour we get back is the one they previously took away.

So what's really a stake here? The question is what kind of reform Republicans can get in return for giving up their Pledge. They want entitlement reform but I would have them go for constitutional reform.

You do have to admire Grover Norquist for his tenacity:
"Deadlock or gridlock is better than moving in the wrong direction. Stasis for the last two years has been a big improvement over heading in the wrong direction."
However, the strategy of allowing federal budget deficits to run up crippling debts by not raising taxes in the hopes that somewhere years down the road some future Congress and President will agree to spending cuts simply doesn't work. What would work is giving the people a direct say in major tax and spending decisions via a ballot question process.

1 comment:

buddeshepherd said...

It really makes no difference. Small business owners, people who earn any amount of money and have few or no dependents, land owners, in short, those who work for their living and have something to lose, (as in take) those people are screwed.