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Super Committee Floating Plan for Vague Tax Reform to Be Determined Later

Super Committee: The only correct move is not to play (Photo via Kelly Canfield)

Official Washington is coming around to the reality that there’s not going to be any kind of big deficit deal coming out of their Super Committee. Co-Chair Jeb Hensarling pronounced little progress. Republican member Pat Toomey said that the talks were at “a difficult point.” Democrat Jim Clyburn called the Republican position “not fair.”

So we’re in face-saving time. And the last-gasp proposal put forward is basically to move the deadline down a bit – but only for taxes. The spending cuts would be real and defined.

With a little over a week left to reach a deal, members of the Congressional deficit reduction panel are looking for an escape hatch that would let them strike an accord on revenue levels but delay until next year tough decisions about exactly how to raise taxes.

Under this approach, the panel would decide on the amount of new revenue to be raised but would leave it to the tax-writing committees of Congress to fill in details next year, well beyond the Nov. 23 deadline for the panel itself to reach an agreement. That would put off painful political decisions but ensure that the debate over deficit reduction stretched into the election year.

Right, because politicians want to keep the focus on unpopular tax increases in an election year. That’s always been part of my theory of politics.

Needless to say, I don’t think this will come to pass. And it is positive from a governance standpoint that the tax-writing committees, not 11 men and 1 woman in a room, will write federal tax policy. But I think it’s telling that the tax issues have to be made vague and put off until next year, while the spending cuts would simply get enacted. There’s no talk of informing the House and Senate Budget Committees of what level of cuts in various programs to enact and leaving the details to them. Only taxes gets this level of deference. And structuring it that way means that lobbyists have a year to try and influence the tax issue, but no time at all to stop the spending cuts.

The idea that there’s any chance of common ground here should be crazy. Republicans offered $300 billion in tax increases through capping deductions if Democrats would lower the top marginal tax rate to 28%, at a cost of untold trillions. Democrats countered, not by using a current law baseline and saying that taxes had to be increased from that, but by agreeing on the extension of the Bush tax cuts for high-end individuals. Their plan stipulated that the individual tax rate should top out at 35%, and that any new tax code should be “as progressive as current law.” But that infers a current policy baseline, which will cost the country at least $3.6 trillion.

This doesn’t set up well. And it goes against the protestations of the White House, that they would never allow the Bush tax cuts over $250,000 to be extended a second time. Again, the best policy at this point is to just let all the Bush tax cuts expire. If afterwards you come back with some other Democratic tax cuts for the poor, fine. But returning the level of tax to the Clinton era is far preferable to these bargaining games.

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Super Committee Floating Plan for Vague Tax Reform to Be Determined Later

Official Washington is coming around to the reality that there’s not going to be any kind of big deficit deal coming out of their Super Committee. Co-Chair Jeb Hensarling pronounced little progress. Republican member Pat Toomey said that the talks were at “a difficult point.” Democrat Jim Clyburn called the Republican position “not fair.”

So we’re in face-saving time. And the last-gasp proposal put forward is basically to move the deadline down a bit – but only for taxes. The spending cuts would be real and defined.

With a little over a week left to reach a deal, members of the Congressional deficit reduction panel are looking for an escape hatch that would let them strike an accord on revenue levels but delay until next year tough decisions about exactly how to raise taxes.

Under this approach, the panel would decide on the amount of new revenue to be raised but would leave it to the tax-writing committees of Congress to fill in details next year, well beyond the Nov. 23 deadline for the panel itself to reach an agreement. That would put off painful political decisions but ensure that the debate over deficit reduction stretched into the election year.

Right, because politicians want to keep the focus on unpopular tax increases in an election year. That’s always been part of my theory of politics.

Needless to say, I don’t think this will come to pass. And it is positive from a governance standpoint that the tax-writing committees, not 11 men and 1 woman in a room, will write federal tax policy. But I think it’s telling that the tax issues have to be made vague and put off until next year, while the spending cuts would simply get enacted. There’s no talk of informing the House and Senate Budget Committees of what level of cuts in various programs to enact and leaving the details to them. Only taxes gets this level of deference. And structuring it that way means that lobbyists have a year to try and influence the tax issue, but no time at all to stop the spending cuts.

The idea that there’s any chance of common ground here should be crazy. Republicans offered $300 billion in tax increases through capping deductions if Democrats would lower the top marginal tax rate to 28%, at a cost of untold trillions. Democrats countered, not by using a current law baseline and saying that taxes had to be increased from that, but by agreeing on the extension of the Bush tax cuts for high-end individuals. Their plan stipulated that the individual tax rate should top out at 35%, and that any new tax code should be “as progressive as current law.” But that infers a current policy baseline, which will cost the country at least $3.6 trillion.

This doesn’t set up well. And it goes against the protestations of the White House, that they would never allow the Bush tax cuts over $250,000 to be extended a second time. Again, the best policy at this point is to just let all the Bush tax cuts expire. If afterwards you come back with some other Democratic tax cuts for the poor, fine. But returning the level of tax to the Clinton era is far preferable to these bargaining games.

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David Dayen

David Dayen