Politics & Policy

The Tax Tango

John Boehner isn’t selling out conservatives on taxes. All he has done is reiterate that Republicans are open to a tax-reform deal that generates extra revenues, so long as the entitlements that are driving our long-term debt explosion are also addressed. He has also said that this reform should not raise marginal tax rates, and should indeed lower them. A deal along those lines might be worth supporting, depending on the details.

The White House is, however, insisting that the top tax rates have to go up as scheduled under the law — and that even more taxes should be placed on high earners. Unless the administration is prepared to give an awful lot on entitlements — holding Social Security benefit increases to inflation, and implementing premium support in Medicare — Republicans would be crazy to take that deal.

Republicans who are inclined to give more ground to Obama make two arguments. They fear that failing to reach a deal, and thus letting taxes rise across the board, will throw the economy into recession. Maybe so. But the most economically damaging tax increases that are scheduled are the ones on high earners, and they’re the very ones that Obama wants to make worse. That’s not an argument for acquiescing to his demands.

Second, they worry that if no deal is cut to avoid tax increases for everyone, Democrats will succeed in blaming Republicans for middle-class tax hikes. House Republicans can avoid that trap, however, by passing a bill that extends the current tax rates for everyone. If taxes do go up anyway, voters are likely to hold the party in control of the White House responsible. And Republicans have already shown they are willing to be flexible on revenue.

Republicans should be willing to negotiate with the administration. But it won’t be a real negotiation unless they’re also willing to walk away.


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