President Obama ran on raising taxes and won. House Republicans ran on not raising taxes, and got to keep their majority. So now the GOP is offering a familiar sounding compromise: let’s not raise taxes.
More specifically, Obama’s re-election, and the looming expiration of the Bush tax cuts, have made House Republicans’ prime imperative to preserve the current tax rates on high earners, which Obama campaigned and won on returning to Clinton era levels.
It’s a big ask, given the results of the election, and Obama’s long-standing pledge to veto legislation that extends all of the Bush tax cuts, even temporarily. Thus, their hopes rest on a vague suggestion that they’ll concede higher revenues in a future tax reform agreement with Obama, so long as he drops his demands for higher tax rates and agrees to cut entitlement spending.
This sounds familiar because it’s broadly speaking the same deficit cutting deal Republicans spent most of this past Congress pursuing — one that raises little, if any revenue, let alone revenue from high earners. And early signs indicate that Democrats won’t bite.
“Because the American people expect us to find common ground, we are willing to accept some additional revenues, via tax reform,” House Speaker John Boehner said in the Capitol Wednesday — his first major address since Tuesday’s election. “But the American people also expect us to solve the problem. And for that reason, in order to garner Republican support for new revenues, the president must be willing to reduce spending and shore up the entitlement programs that are the primary drivers of our debt.”
As a model, Boehner cited a revenue neutral 1986 tax reform initiative spearheaded by President Reagan and Speaker Tip O’Neil. Top Democrats, including Sen. Chuck Schumer (D-NY), have loudly rejected that framework, arguing that it raises too little revenue to address medium-term fiscal imbalances, and lets wealthy people off the hook for drawing down budget deficits.
That leaves a yawning chasm between the parties, which cannot be bridged unless the Democrats soften their demands, or Republicans figure out a way to assure the tax reforms they are proposing raise significant revenue on their own — without relying on dubious projections of ensuing economic growth — and that it’s taken largely from top earners.
Aware of the leverage that the expiring Bush tax cuts provide Democrats, one Senate leadership aide warned that if Republicans don’t allow the tax rates on top earners to expire, they’ll push the country off the fiscal cliff.
And Republicans aren’t ready to go there.
“There is no mandate for raising tax rates on the American people,” House Majority Leader Eric Cantor said Wednesday in an official statement that again stressed the GOP’s opposition to higher tax rates. “There is a mandate for avoiding the fiscal cliff and finding real solutions so we can make life work for people again. Higher tax rates won’t create jobs.”
Brian Beutler is TPM's senior congressional reporter. Since 2009, he's led coverage of health care reform, Wall Street reform, taxes, the GOP budget, the government shutdown fight, and the debt limit fight. He can be reached at email@example.com.