Some conservatives oppose limiting deductions

Conn Carroll:
House Republican leaders planning to offer increased revenues through closing loopholes in fiscal cliff negotiations with President Obama need to check in with their base. Conservatives are not only not buying the distinction between raising revenue though rate hikes and limiting deductions, they are also arguing that closing loopholes would be worse.

“I am absolutely in favor of simplifying the tax code. I am absolutely in favor of getting rid of loopholes. But I am absolutely opposed to engaging in machinations of the tax code designed to increase spending through closed loopholes and the like,” RedState‘s Erick Erickson writes. “[GOP] plans are designed around tactics, not strategy, and tactics designed to avoid as much blame as possible for a mess they were complicit in creating.”

American Enterprise Institute fellow Marc Thiessen details why closing loopholes would be a strategic error: “Every dollar from limiting deductions that is used for a down payment today is a dollar that cannot be used tomorrow to buy down lower tax rates. … if Republican leaders use those revenues as part of a down payment, then the GOP have to find some other way to pay for lower rates on high earners. And the only source of revenue left would be tax increases on lower- and middle-income taxpayers. This means that real tax reform will never happen — because the GOP will never lower tax rates on top earners and pay for it with higher taxes on the poor and the middle class. That would be political suicide.”

House Republicans are in a tough spot. Taxes are set to automatically go up and there is nothing they can do to stop it. Given those facts, Republican leadership ought to start thinking about how to best set up long-term policy and political victories, and stop worrying about short-term inevitable defeats.
It is hard to get a sense of exactly what Republican bargaining looks like at this point.  The biggest problem is Democrats have not made any proposal other than raising taxes.  They appear to be giving the GOP the choice of raising taxes on those making more than $250,000 or raising taxes on everybody with the expiration of the Bush tax cuts.  They seem ready to tank the economy and blame the Republicans.

The GOP needs to stop being defensive and start blaming Democrats for their failure to deal responsibly with the spending issue while at the same time failing to stop the tax cuts from expiring.  I would be surprised to see a deal at this point, because I don't think the Democrats want one.  They are not willing to give up their tax and spend addiction.  This is not particularly surprising since every time one of the deals happens they never live up to their promise to cut spending.

This is why I think one of the things Republicans should be bargaining for is repeal of baseline budgeting which lets Democrats increase spending annually without having to take credit for it.


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