What are the prospects for old-fashioned tax reform — trading lower rates for a broader base? During an inteview on NPR yesterday, I touted the old mantra as the best sort of tax policy. But I have to admit, its political viability seems dubious, at least in an era when Grover Norquist calls the shots for GOP candidates.
The New Republic's Jonathan Chait seems to agree. In a review of Alan Viard's new piece on the Bush tax cuts, he bemoans the state of GOP thinking on tax policy:
- Moreover, while I disagree with Viard about the incentive effects of upper-bracket tax cuts — I think the impact is extremely minimal — I do think you could usefully reduce upper-bracket taxes rates in a way that wouldn’t impact either the progressivity of the tax code or the deficit. You’d simply have to compensate for the lower tax rates by closing tax loopholes. But the Republican Party, as opposed to a few academics loosely affiliated thereto, is much less interested in the theoretical benefits of tax rate reductions and much more interested in policies that simply increase the after-tax income of the very rich, so the point is moot.
Where have all the responsible Republicans gone? Have they been killed off by the likes of Grover Norquist? Here’s an interesting tidbit from the Ohio governor’s race:
- [John] Kasich critics also noted that although Kasich [the GOP nominee] has signed a pledge sponsored by Washington-based Americans for Tax Reform “to oppose and veto any and all attempts to increase taxes,” he told The Dispatch that he doesn’t think eliminating a tax loophole is a tax increase or violates the pledge.
Grover Norquist, president of Americans for Tax Reform, told The Dispatch yesterday that any move to close tax loopholes would be a tax increase and a violation of the pledge without offsetting tax cuts of equal value.
[Kasich spoesman Rob] Nichols said Kasich understands the pledge and won't violate it because "he is not going to raise the tax burden on Ohioans."
Unless, of course, you “pay” for it by creating another loophole for someone else. Since that new loophole would be a tax reduction — for some lucky slob — it would presumably get the wayward Tax Pledger off the hook. Better yet, create two or three new loopholes, maybe for some of your best friends and campaign contributors. Then you’ll get to close a loophole and actually “cut” taxes. All without having to make any hard choices at all. (Except maybe deciding who gets the special favors in this round of Raid-the-Fisc.)
In Grover's book, a tax hike is a tax hike is a tax hike. Any revenue increase is a violation of Republican Holy Writ. The corollary: a tax cut is a tax cut is a tax cut. Any revenue decrease is a good thing. Hand out a favor to some of your best buddies and campaign contributors, and you can legitimately claim to have cut taxes. And, of course, avoid the Wrath of Grover.
Tax reform, in the Grover world, doesn't involve trading a broader base for lower rates. It means trading one set of special interest loopholes for another set of special interest loopholes. A nice deal, if you're a political cynic or nihilistic government-hater.