Incomparably, we take a guess: Yesterday, David Brooks made a concession about tax deductions—a concession against tribal interest.
But first, a bit of background:
In the current tax debate, Republicans are breaking their backs to avoid raising upper-end tax rates. Instead, John Boehner says he wants to eliminate deductions and loopholes for high earners. Like-minded Republicans are willing to enact some extremely complex schemes in order to do this.
What would this distinction matter? Either way, the highest earners would end up paying more in taxes. Why would they care if they’re paying more because of changed tax rates or because of changed deductions?
They would be shelling out more either way. Why would the method matter? Why does the method seem to matter so much?
Yesterday, Brooks said it shouldn’t matter. In this passage, he made an admission against tribal interest:
BROOKS (12/4/12): Republicans should go to the White House and say they are willing to see top tax rates go up to 36 percent or 37 percent and they are willing to forgo a debt-ceiling fight for this year.Oops! If raising revenue by raising tax rates “is not that much worse for the economy,” why is the GOP trying so hard to stick to that preferred method?
This is a big political concession, but it’s not much of an economic one. President Obama needs rate increases to show the liberals he has won a “victory,” but the fact is that raising revenue by raising rates is not that much worse for the economy than raising revenue by closing loopholes, which Republicans have already conceded.
In this blog post from last week, Paul Krugman considered that very question. To our mind, the following possibility seems strong:
Once the marginal tax rate goes up, it’s very hard to bring it back down. It’s much easier to restore a deduction you have eliminated.
It’s hard to lower tax rates. The marginal rate has been changed just five times in the past 32 years. The marginal tax rate went up two times—under Bush 41, then under Clinton. It came down on three occasions, most recently under Bush 43.
Each change in the marginal rate was an extremely high-profile affair. Changes in tax rates are easy to explain, even for major journalists; in part for that reason, such changes get lots of attention. For that reason, it’s hard to change the marginal rate, whether up or down.
If the marginal rate returns to 39.6 percent, as Obama proposes, it won’t easily come back down.
(In 2001, Bush was able to lower tax rates because budget authorities were projecting large budget surpluses. Even in that circumstance, it took a pretty good fight.)
Loopholes, deductions and “tax expenditures” are a whole different kettle of blowfish. Loopholes come and go all the time, depending on who sent in the latest campaign contribution. If a bunch of deductions get dumped as part of a grand bargain, wouldn’t it be easier to restore them at some later date?
Does this distinction explain the GOP approach? We have no idea. But the GOP is breaking its back to offer changes in tax deductions as opposed to changes in tax rates.
Loopholes are easy, tax rates are hard. Does that explain these labors?
Boehner is said to be "easy-going." Is this why he’s working so hard?