Pretty Much

From TPM Reader ML

Your libertarian friend’s reasoning about top rates versus deductions may make sense as a hypothetical Fabian strategy, but I doubt that is the principle behind the majority of Republicans’ and conservative activists’ rejection of higher rates and alleged acceptance of limiting or ending deductions. I will bet that the majority have not come to some sort of psychological acceptance that rates will inevitably rise, and that they simply can delay the first round to mitigate the cumulative result. While Walsh and West got defeated, the overwhelming bulk of Tea Party freshmen were reelected in a Democratic year, so why should they suddenly come to accept the need for higher income tax rates, even if only for the future and not right now? Their reelection “vindicated” them.

More likely, it’s a bait and switch strategy: “Take higher rates of the table and we’re open to ending or limiting deductions.” This is a potentially cunning strategy in that if Democrats get sucked into it, they are pulled into the rabbit hole of protracted and confusing debates about which deduction serves an economic or social purpose, and which is a mere subsidy (whereas the debate on rates is mathematically simple and politically straightforward). Also, rather than having an identifiable class of rich people defending lower rates for self-serving reasons, the deductions issue gets Congress crosswise with lobbies that pretty much collectively own the Capitol. Mortgage deduction? – the mortgage bankers, builders, real estate interests, and so on. Health insurance exclusion? – everyone from small business to General Motors to the AMA and the hospital associations. Try ending the child tax credit! Congress would exhaust itself in fruitless debates that would protract over months and years; meanwhile, the top rates will have not risen. That’s called victory, especially if the Senate turns over in 2014 (in view of the Senate seats that are up in 2014 that is certainly doable, if difficult).

And frankly, I doubt whether most Republicans are sincere in their suggestion that they would vote for deduction limitations even if by some miracle a fiscally significant package were presented to them. Note that they never specify which deductions would be acceptable as substitutes for rate increases; the Romney campaign was nothing short of mendacious in its refusal to say which deduction terminations would offset their 20-percent rate cuts. And remember, when Harry Reid ran a test vote on ending the egregious tax deduction for private jets, the GOP was solidly against the amendment. So what makes anybody think the GOP would vote to end, or even cap, the home mortgage deduction?