Politics & Policy

Toomey’s Tax Hikes

Did the plan derail bigger tax hikes from the supercommittee?

When a prominent Republican senator is praised as a “compromiser” in mainstream publications, conservatives start grinding their teeth. The Right has no shortage of sarcastic terms for conservative candidates who shift leftward once elected — “going Washington,” “growing in office,” “Strange New Respect.” Once a half-dozen Republicans were named to the supercommittee, conservatives looked for the weakest link, the lawmaker most likely to acquiesce to a Democratic plan that included tax hikes. The one they probably suspected the least was Sen. Patrick Toomey of Pennsylvania, a tea-party favorite and former president of the anti-tax activist group Club for Growth.

So when Toomey offered a proposal that included billions in new “revenue,” he raised eyebrows among fiscal conservatives, as his idea represented a significant concession. The Toomey plan included $250 billion in revenues from eliminating or reducing tax deductions for the top two income brackets (which start at $174,400 for those filing singly and $212,300 for those filing jointly in this tax year). The plan also included $100 billion in “non-tax revenues,” described as user fees and asset sales.

Some conservatives lambasted the proposal; Americans for Tax Reform president Grover Norquist labeled it “poison,” and nationally syndicated radio host Hugh Hewitt blogged that Toomey was driving the GOP toward a crack-up:

Any deal like Toomey’s would greatly injure the chances of gathering the sort of energy necessary to recreate the 2010, 1994 or 1980 sweep because it would be an obvious indictment of the credibility of the House and Senate GOP, not one member of which ran on such a platform last year. [Supercommittee member and Texas Republican Rep.] Jeb Hensarling and Pat Toomey have been frequent guests on my radio show over the past couple of years, and both are sound conservatives. Neither of them ever appealed for support or votes or campaign contributions so they could go to D.C. and cripple the housing market and everyone’s home value by limiting the mortgage interest deduction on so-called high-end homes. Neither of them urged capping the charitable deduction so that churches, synagogues, hospitals and tens of thousands of other non-governmental agencies would see contributions decline. Neither of them urged that state and local taxes be made non-deductible so that those Americans already bearing the highest costs of government would bear even more. They didn’t do so. No one did. . . . They were not sent there to be part of the all-knowing, all seeing Committee of Oz.

However, as more details of the committee’s closed-door deliberations dribble out, it appears Toomey’s plan may well have saved the GOP from worse alternatives. Evidently, some congressional Republicans — on and off the committee — were amenable to tax increases significantly larger than the ones in Toomey’s plan.

Last month, Politico reported that “leaders have discussed options that would commit to adding $600 billion in true tax receipts — most of which would come from future reforms backed by [House Speaker John] Boehner and [supercommittee member Dave] Camp.” In November, Fred Barnes reported on a “Plan B” put forth by Democrats that would consist of roughly $600 billion in spending cuts and $600 billion in tax hikes, and remarked, “Conservatives are worried three Republicans on the super-committee — House members Dave Camp and Fred Upton and Senator Rob Portman — might accept Deal B as a last resort.”

Asked whether other Republicans on the supercommittee were open to tax hikes larger than the ones included in his plan, Toomey refuses to disclose remarks made behind closed doors. “I think the Republicans on the committee were . . . generally . . . [long pause] reasonably well united,” he says before refusing to elaborate further. Asked whether he worried about GOP lawmakers not on the supercommittee agreeing to tax hikes, he responds, “I think there are some Republicans in Congress who would have been willing, and who probably still are willing, to agree to very substantial tax increases. I think that is the wrong policy for many reasons, not least of which is that this country has a spending problem, not a revenue problem.”

Toomey acknowledges that the reduction or elimination of deductions represents a concession, but adds that his reform package as a whole represented a dramatic win for supporters of limited government and free-market economics: give a little in one policy area, get a lot in other areas. He says:

The main motivation is that I have been and continue to be concerned that we’re headed towards the biggest tax hike in American history and we might very well not have the political ability to stop it,” Toomey says. “My reform proposal would have avoided that, and I think that’s a very big deal. Secondly, my plan didn’t merely call for making current rates permanent but rather called for solidly pro-growth tax reform that would actually lower marginal rates and offset the lost revenue with the contraction in the value of deductions — somewhat more than offset that, hence the $250 billion net scored revenue increase. I would argue that we should never have to pay for solid pro-growth policy, but clearly we’re going to have to pay if we’re going to get it, and in order to have that pro-growth policy and avoid a much bigger tax increase that is just fourteen months away, I thought we should be willing to pay that price. Yes, it was also contingent upon getting some substantive reforms in the biggest drivers of our long-term debt, the entitlement programs. But the biggest goal was to get that pro-growth policy.

Toomey has realized that for many congressional Democrats, tax hikes aren’t about increasing government revenue as much as punishing wealthy Americans, whom the Left has deemed morally objectionable no matter how they accumulated their wealth. “The most telling evidence of that was their response to the final offer we proposed, after they rejected my framework,” he says. “We went back and scoured many proposals and reform ideas — we included elements from the president’s own budget, Simpson-Bowles, Rivlin-Dominici. And we took the least controversial spending cuts and revenues — items such as asset sales, spectrum auctions, and asking banks to pay something closer to a market rate for Fannie and Freddie guarantees. That was a combination that added up to $644 billion — much of which was revenue — and they rejected it out of hand because it didn’t punish anyone! Sure it was revenue, and the spending cuts were relatively noncontroversial, but nobody was getting a tax increase. In the end, they wouldn’t agree to a single dime in spending cuts unless someone was getting whacked with a tax increase. And that does suggest some troubling motivations.”

With Toomey’s proposal a dead issue for now, Hewitt remains a fan of Toomey overall, but considers it an uncharacteristically unwise move on the senator’s part. “It wasn’t just that he wanted to raise taxes; he wanted to do so in an extremely harmful, anti-conservative fashion: by penalizing home ownership and charities (including every church in America), as well as [disregarding] federalism principles,” Hewitt says. “Anything so radical ought to be vetted by a large group of, not just legislators, but also the grassroots, including the Tea Party, before being put into play on a fast track. . . . These were unusual circumstances to be sure, but all Republicans have to remember that we are not a party of secret deals and Obamacare-like special carveouts done in quiet rooms full of moneyed interests.”

Toomey says he was “disappointed” to see conservatives such as Hewitt and Norquist roasting his proposal, but he acknowledges that “good, reasonable conservatives can disagree on the best approach to the situation. I think it’s worth something to avoid a gigantic tax increase that is written into the law and we may not have the political ability to prevent! I think having pro-growth tax reform is worth something, and I think there is a reasonably broad consensus on the Republican side that I’m right — the Wall Street Journal editorial page, George Will, Charles Krauthammer, Bill Bennett, Paul Ryan, and many of my colleagues. I understand the anxiety that it created, but I do think it was the right policy.”

Indeed, not every talk-show host is fuming over Toomey’s proposal. Bennett says, “I like and admire Senator Toomey and think he did the right thing. . . . His plan would broaden the tax base while reducing rates, much like Paul Ryan’s plan. But most importantly, Senator Toomey gave us the best chance to win the political narrative. Republicans, our side, stepped up and offered more revenue, while Democrats balked and the president did nothing. Some in the conservative base were bothered by Toomey, but I wasn’t, and independents and moderates should be impressed if they hear about it.”

Toomey says that he plans to take elements of his plan, the relatively non-controversial spending reductions and non-tax-hike-related ways of increasing federal revenue, and bring them to the Senate floor individually. His collective plan may be kaput, but some of the ideas may still have some fight left in them.

— Jim Geraghty writes the Campaign Spot on NRO.

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