Grassley Open to Tax Hikes, If Scored Differently

by Patrick Brennan

Senator Chuck Grassley of Iowa has said that he and other Republicans would be open to increasing tax revenue if the CBO would agree to score current and future policy differently. He would prefer that they use dynamic scoring, which takes into how people’s economic behavior changes based on new tax rates, and scores on those economic projections, not standard ones. Grassley wants economic growth and tax revenue resultant from lower marginal rates to count as a revenue increase just like a tax hike — and argues that this victory would be worth small concessions now. National Journal reports:

The GOP, Grassley said in an interview, would be able to stomach a net increase in tax revenue from eliminating tax breaks as long as some of the new money came from dynamic growth — and was scored as such by the Congressional Budget Office.

“Congress has to be able to dictate to CBO that you get credit for the dynamic economy” effects of lowering nominal rates, Grassley said. If that condition were met, he said, Republicans could get behind a deficit plan along the lines of the Simpson-Bowles commission’s recommendation of a 3-to-1 ratio of spending cuts to tax increases.

“That’s been the hold-up: When the Gang of Six was trying to follow Simpson-Bowles, there was some opposition in the Republican caucus toward the Republican members of that — and the feeling was that we weren’t getting enough credit for economic growth,” Grassley said. “If that problem can be solved, I think it brings Republicans along.”

To date, the GOP has embraced lower marginal rates going hand-in-hand with the elimination of some breaks in a “revenue-neutral” formula. Asked repeatedly if he was indeed endorsing a net increase in revenue that was not just attributable to anticipated growth, Grassley said he was. “Yes,” he said, “but that’s kind of a touchy thing to talk about when [anti-tax lobbyist] Grover Norquist is making the decision of what’s a tax raise, and that’s why I put emphasis on getting economic growth scored.”

Grassley said that the scoring change Republicans would require in order to sign off on such a plan would reap dividends for the GOP’s small-government approach over the long term.

“If you get CBO turned around to dynamic scoring, it will benefit the conservative approach to government and taxes in later years,” the former chairman of the Senate Finance Committee said. . . . “A little bit lost next year is a big gain down the road,” Grassley said.