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In a comment a week ago Sunday that got surprisingly little attention, Mitch Daniels said on Meet the Press:
[It] seems to me that someone who would be our next president should take one pledge, and one only, and that's the one that involves the Bible and the west front of the Capitol Building. And at this point, my view is that we should address our economic issues, and for that matter our debt issues, without at least raising tax rates.
He was responding to a question from Savannah Guthrie about the last Republican presidential debate in which all candidates said they would reject a deal that had $10 in spending cuts for every dollar in tax revenue.
He went on to note that, first, we should raise more revenue with tax reform that lowers rates and eliminates loopholes, and second, we should be wary of Washington’s poor record of committing to spending cuts they never ultimately make. And he concluded by saying we “ought not rule out anything” in pursuit of tackling our fiscal crisis.
After the last debate, Kevin Williamson wrote at National Review:
If Congress wanted to get rid of tax exemptions and exclusions amounting to $100 billion in new taxes in exchange for $1 trillion in cuts, and Republicans turned the deal down, I would personally drive down to Washington and pelt them with rotten vegetables, and possibly with rocks. $100 billion in new taxes plus $1 trillion in cuts balances the budget in 2012.
Commenting on Williamson’s response, Ross Douthat wrote: "I’m not sure if enough conservatives understand that this is going to be the problem facing the eventual Republican nominee in 2012." He points out that Obama and his team will do whatever they can to portray the Republican nominee as more willing to slash spending that to close one loophole for the rich.
Daniels’ remarks are consistent with these sentiments. He was clearly taking a not-so-veiled swipe at Republicans’ adherence to the Taxpayer Protection Pledge above all other policy orthodoxy when he said the next President should only take the pledge required by the Constitution. The taxpayer protection pledge defines not just tax rate increases as a tax increase, but also any removal of an exemption from the tax code that is not offset by a tax cut elsewhere. Under this definition, removing tax breaks clearly designed to benefit an interest group (ethanol providers being a good example) without cutting their taxes some other way is a tax increase.
If Republicans cannot redefine this part of the pledge, pushing tax reform is going to be extremely difficult. There have been more than 14,000 amendments to the U.S. tax code since the pledge was created over 20 years ago, and it will likely be impossible to guarantee that every single special interest loophole will be perfectly offset by the reduction in tax rates. Some group will cry foul, and all pledge signers will be stuck.
This is important to note now, since:
- With Obama rolling out a jobs plan that will surely involve more stimulus and no tax reform aimed at spurring growth and investment, Republicans will surely push tax reform as an alternative to whatever Obama does.
- With the super committee ramping up its work this fall, tax reform will receive more attention again, even if the committee does nothing with it.
- Republican presidential candidates will, as a result of these events, have to say where they stand on tax reform.
A candidate who understands that the GOP is now the Party of Change will echo what Daniels said. Boldness on entitlement reform and this aspect of tax reform is a pretty good litmus test for determining who is a true reformer and who isn't.
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