Advocates of higher taxes keep swinging and missing. First it happened in the debt-limit deal; next it’s going to be in the bipartisan congressional committee’s deficit-reduction deliberations. While tax raisers correctly point out
that nothing in the legislation prohibits tax increases from “stepping up to the plate,” there are three good reasons why they will strike out once again.
Strike 1: Tax hikers conveniently forget there was bipartisan opposition to tax increases in the debt deal in the first place. That is why taxes were dropped as negotiators got close to a final deal. While they served as a talking point for the left, they were never a good negotiating one because of their lack of support.
Tax increases are so unpopular that those advocating them can’t bring themselves to call them what they are. Instead, advocates speak in code, such as “balanced approach” and “shared sacrifice.” So why would the increases be more acceptable when negotiators start getting down to specific deficit-reduction proposals?
Moderate and conservative Democrats in both bodies of Congress wouldn’t go to bat for them. To those Democrats opposing them on principle, add the Democrats who opposed them on politics - those facing tight re-elections and fearing political consequences - and you come up with notable Democratic opposition in addition to the Republican opposition.
Though never portrayed that way, the partisan shoe fit better on the other foot: Support of tax increases was the partisan position. The tax-hike fight, as clearly as any issue does, shows that Washington’s real division today is more ideological - between left and right - than simply partisan.
Tax-hike advocates were very fortunate that their proposal died when it did before further discussion revealed the true ideological rift and how few stood in favor of their plan.
Strike 2: Even dismissing the argument above, what leverage do tax hikers have now? The fallback deficit-reduction solution is sequestration, i.e., across-the-board spending cuts. Therefore, spending-cut proponents win either way: with agreed-to, specific spending-cut proposals or enforced across-the-board spending cuts if specific cuts can’t be negotiated. For spending cutters, it’s a no-lose scenario.
And spending cutters won that debate over tax hikes before they had a backstop of spending enforcement. Now they do. Why, if they were able to prevail in a less advantageous bargaining position, would they be unable or unwilling to do so now in a better one?
Strike 3: The next big agenda item for spending cutters is tax reform - the grand slam of economic-growth incentives. Any tax provisions they agree to in deficit reduction would increase revenue, which could be used to lower overall tax rates in tax reform. Why would they trade away spending cuts, which they otherwise would get through sequestration, for less future tax-rate reduction? It makes no sense.
Proof of the positive economic impact from tax reform in general, and lower taxes in particular, comes from none other than tax-hike advocates themselves.
Tax hikers are clear that they don’t propose imposing increases on the current weak economy. Instead, they would have taxes increase a few years from now, once the economy has strengthened. By so doing, tax hikers stand in implicit agreement with those opposing tax hikes: Both sides admit increases are an economic negative - tax hikers simply think, apparently, that there will be a time in the future when America could, would or should be willing to settle for a less robust economy.
Tellingly, you don’t hear that same line of reasoning pertaining to spending cuts. Everyone - except the most die-hard liberal - is quite willing to let those take place immediately. Again, implicit is agreement on both sides that such spending has questionable economic value.
You’re out: Any one of these three factors would be enough to decide the tax hikers’ fate in the next round of the deficit-reduction debate. All three together make the decision overwhelming.
Tax increases have struck out on three pitches. And in baseball parlance, they looked bad doing so. Tax-hike advocates can go back to the dugout and watch the rest of this game from the bench, where they belong.
J.T. Young served in the Treasury Department and the Office of Management and Budget from 2001-04 and as a congressional staff member from 1987-2000.