Let’s imagine a scenario. Obama comes forward with a tax-reform proposal along Bowles-Simpson lines, one that meets the GOP halfway. He comes up with three marginal rates for individuals, the highest one around 35, maybe 38 tops; or maybe he adds a fourth “LeBron James” rate, a higher rate on dollars earned above some fantastically high figure that applies to something like .2 percent of all tax filers; but that would probably be in there as a bargaining chip. He proposes the elimination of certain “tax expenditures,” or deductions and loopholes like the home-mortgage-interest deduction and the deduction for employer-sponsored health care, which are the two big ones; or maybe he’s more modest about this and places caps on those, not eliminating them entirely; or perhaps he sticks with something like getting rid of the state and local tax deduction. Finally, he lowers the corporate rate from the current 35 percent, but proposes closing several corporate loopholes, like energy-tax preferences for the oil and gas industry.
WWMD? That is, what would McConnell do—and Boehner, and Cantor, and the rest? Would they scratch their chins and say, “Gee, this is great. We’re delighted that the president has put something serious on the table, and we will work hard with him to find common ground”? Actually, they might say that, at first, just to pull the wool over people’s eyes. But in short order, the line from them and their confederates in positions of lighter responsibility would be: “This is a massive tax increase! Eliminating these deductions on middle-class people will raise their taxes, so he’s breaking his promise, see, we told you! The LeBron tax is just more ‘Democrat’ class warfare, more punishing the job creators.” “The corporate plan,” they’ll say, “sounds good on paper, but again, he’s attacking the job creators by eliminating these important deductions, and many corporations, especially small businesses”—you know they’ll throw that one in!—“are going to end up paying more.”
And that’s just elected officials. At Heritage and Cato, they’ll comb through the fine print and find an Achilles’ heel, something that can be distorted to sound just hideous, which will of course be in there, because tax policy is unbelievably complex. And then, once Mr. Oxycontin and the Fox people start hooping and hollering about that, it won’t be long before the whole thing can be dismissed as something Marx would be proud of.
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