Republicans Will Cave On Tax Hikes For High Income Earners
Whether it comes now or in January, President Obama is going to win the tax debate.
Byron York explains quite simply why President Obama will end up winning the current stand-off over House Republicans over the fiscal cliff and increasing tax rates on high income earners:
Republicans will cave on the question of raising the tax rate for the highest-income Americans. The only question is whether they do so before or after the government goes over the so-called fiscal cliff.
First, many in the GOP do not believe that raising the rate on top earners from 35 percent to 39.6 percent (the rate before the Bush tax cuts) would seriously damage the economy. Second, they know that most Americans approve of higher taxes on the top bracket, and President Obama, having campaigned and won on that platform, seems dead-set on higher rates. Third, they fear that if the government does go over the cliff and Democrats propose re-lowering taxes for everyone except the highest earners, Republicans would be in the impossible position of resisting tax cuts for 98 percent of the country on behalf of the top 2 percent.
It’s true that “Mr. Obama also can’t get what he wants without House Republicans. He needs their votes to extend current rates for lower-income taxpayers, as well as to prevent the Alternative Minimum Tax from hitting 27 million more taxpayers.” But think for a minute about the implications of what the Journalseems to be saying. The Journal editors believe that after January 1, when taxes will have gone up for everyone, House Republicans will block Democratic legislation that would cut taxes—that would restore the lower 2012 rates for the vast majority of taxpayers, fix the Alternative Minimum Tax, and for that matter would probably offer a compromise on dividends and the death tax better than what will be the new dividend rate of 39 percent and death tax of 55 percent with a $1 million exemption.
Will Republicans really oppose such legislation? President Obama will be beating the drums for this tax cut. Senate Democrats will pass this tax cut. If Senate Republicans vote against it, it won’t be “Senate Democrats running for re-election in 2014” who will have a tax hike on their resumes. It will be Senate Republicans who will have voted against cutting taxes. And if House Republicans block such legislation, it will be they, and they alone, insisting on higher taxes.
Of course they won’t. Republicans will fold with lightning speed after we go over the tax cliff on January 1.
York and Kristol are exactly right, of course. If we’re unable to reach a deal to avert the nation from going over the fiscal cliff, one of the very first things you can expect from the President and the Senate Democrats would be a bill that returns tax rates to their “Bush Tax Cuts” level for all taxpayers except those earning more than $250,000 per year in taxable income. Moreover, this bill would be different from a mere extension of the Bush Tax Cuts in that it would be a permanent lowering of the rates for all affected taxpayers. The GOP could respond to this with a bill that lowers tax rates for everyone, but does anyone seriously believe that Republicans are going to die on the hill of an increase in the marginal tax rates for 2% of the population by opposing a tax cut? Of course they won’t.
First of all, in such a situation the Norquist tax pledge would not be an issue at all. There’s nothing in the pledge that talks about lowering tax rates, and nothing in there that requires those who have signed it to oppose an tax cut that only applies to certain income groups. The outside pressure on the GOP to resist the President’s efforts to increase the top marginal tax rate would no longer exist, and the lobbying power of people like Norquist in this type of situation would be non-existent. Second, Republican leadership is no doubt well aware of the polling that shows that the public supports increasing rates on high income earners and, I’m certain that similar polling that the public would overwhelmingly support reducing taxes on the middle class. Were the GOP to seriously attempt to block the President’s efforts to cut taxes for the vast majority of Americans, they would suffer a political disaster of immense proportions.
President Obama knows all of this, of course, as do the Democrats on the Hill. They also know that the Republicans are most likely to get blamed if the nation does go over the fiscal cliff. The Republicans know it too, which is why you continue to hear Republicans in both the House and the Senate discussing the idea of putting revenues on the table in a much more substantial way than the negotiators in the House have done so far. The GOP has two choices at this point. They can either make a deal that includes an increase in the tax rate for high income earners while at the same time extracting in the bargain something that they want like additional spending cuts or entitlement reforms. Or, they can insist on their anti-tax orthodoxy, watch the nation go over the cliff, and then pay the price in January when Obama will be able to win this argument quite easily. They don’t have much longer to decide which way to go.