Debt Debate: Wiggle Room in Anti-Tax Pledge?

Jul 21, 2011 11:02am

gty money jef 110614 main Debt Debate: Wiggle Room in Anti Tax Pledge?

ABC News' Z. Byron Wolf (@zbyronwolf) reports:

Here’s what could be a tectonic development in the debt debate today and perhaps a glimmer of hope for a grand bargain to deal with the nation's annual deficits: some wiggle room in the pledge not to raise taxes.

The Washington Post editorial board asked Grover Norquist if politicians' failing to extend the Bush-era tax cuts would violate his Americans for Tax Reform pledge against new taxes, which most Republicans have signed onto and hold sacrosanct.

“Not continuing a tax cut is not technically a tax increase,” Norquist, group president, told the Post editorial board.

There is an important distinction here. Norquist is not saying he’s going to support some sort of revenue-raising, tax-hiking, deficit-reduction proposal. But for him to suggest that raising $4 trillion in tax revenue by allowing the Bush tax cuts to expire does not break the tax pledge is interesting, indeed.

By mid-morning, Norquist was on cable TV clarifying his stance.

"It wouldn't pass the laugh test to go to the American people and tell them you just allowed $4 trillion in higher taxes by allowing the 2001, 2003 lower rates to lapse and tell people that's not a tax increase. It clearly would be a dramatic increase on taxes," he said during an interview on MSNBC.

"How you get into CBO scoring is a different issue in terms of taxes lapsing," he said.

"There are certain things you could do technically and not violate the pledge, but the general public would clearly understand is a tax increase," he said.

"So I can be clear: Americans for Tax reform would oppose any effort to weaken, reduce or not continue the 2001, 2003 Bush tax cuts and, in fact ,any changes in taxes should be kept separate from the budget deals."

Democrats are crowing that the distinction, however small, between breaking the pledge and increasing taxes will help them pass a more sweeping deficit deal that would include revenue measures.

But it is not clear how this development will or could affect the debt-ceiling debate. Norquist is skeptical of the so-called Gang of Six proposal. His statement Tuesday about that potential debt deal hatched by the three Republicans and three Democrats read: “It is a mistake to invest one’s hopes or fears while the ‘plan’ remains unclear and subject to change by a Senate Finance Committee selected by Democratic leader Senator Harry Reid (D-Nev.).”

There is a lot of disagreement in Washington about whether the Gang of Six proposal raises taxes or lowers them. The non-partisan Congressional Budget Office says that extending the Bush-era tax cuts is itself a tax cut because they are scheduled to expire next year. Republicans have said that extending the tax cuts would be extending current policy and should not be considered a tax cut.

So the Gang of Six proposal, which would lower most people’s overall tax rates but do away with loopholes such as mortgage deductions means either a $1.5 trillion tax cut over ten years, according to the CBO, or a $1trillion tax hike, according to most Republicans. It's a matter of perspective.

But there are some high-profile Republicans — tax-pledge signers such as GOP Sen. Lamar Alexander of Tennessee, for instance — who are looking seriously at or endorsing the Gang of Six proposal. The Republican members of the Gang of Six are all pledge signers.

Read more bout the Gang of Six.

"This is a serious, bipartisan proposal that will help stop Washington from spending money we don't have, and I support it,” the Senate’s No. 3 Republican, Alexander, said in a statement this week.

Don’t look for most Republican leaders suddenly to embrace a plan that raises taxes.

“Americans have seen what government does with new tax revenue: they waste it on things like turtle tunnels,” Senate majority leader Mitch McConnell of Kentucky said on the Senate floor this morning.  “Until Washington can prove that it’s responsible with our tax dollars, we shouldn’t be sending it more of them.”

The tax pledge has been shown to be elastic in the past. In 2009, when Congress voted to tax the bonuses of AIG executives, Norquist determined that would not break the pledge (either before or after) it became clear that 85 Republicans in the House would vote for the special tax. Read more about  that here.

UPDATE: Norquist's group, Americans for Tax Reform, issued another statement just before noon. It clarifies that he opposes tax increases of any kind. It also says "it is a violation of the Taxpayer Protection Pledge to trade temporary tax reductions for permanent tax hikes."

The full statement:

ATR opposes all tax increases on the American people.  Any failure to extend or make permanent the tax cuts of 2001 and 2003, in whole or in part, would clearly increase taxes on the American people.  In addition, the failure to extend the AMT patch would increase taxes.  The outlines of the plans are deliberately hazy, but it appears that both Obama’s Simpson-Bowles commission proposal and the Gang-of-Six proposal dramatically increase taxes on the American people.

It is a violation of the Taxpayer Protection Pledge to trade temporary tax reductions for permanent tax hikes. 

The present conversations in Washington should focus totally and exclusively on reducing government overspending.  President Barack Obama has increased the annual federal budget by almost $1 trillion dollars.  ATR has not altered either its policy positions or opposition to all tax increases whatsoever in any debt negotiations.

Tax reform that reduces tax rates and broadens the tax base on a revenue neutral basis should be done separately and not in a rush under duress from parties hostile to the interests of taxpayers.

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