Two More Republicans Break With Norquist Pledge
Two more Republicans are joining the growing list of Republican members of Congress who are choosing to ignore Grover Norquist:
Sen. Lindsey Graham (R-S.C.) said Sunday he was willing to violate Grover Norquist’s “Taxpayer Protection Pledge” to strike a deal with Democrats over the so-called “fiscal cliff,” while a second Republican, Rep. Peter King (N.Y.), echoed the assessment of Sen. Saxby Chambliss (R-Ga.), who said last week that Norquist’s pledge may be outdated.
“I agree with Grover, we shouldn’t raise rates, but I think Grover is wrong when it comes to we can’t cap deductions and buy down debt,” Graham said on ABC’s “This Week With George Stephanopoulos.” “What do you do with the money? I want to buy down debt and cut rates to create jobs, but I will violate the pledge, long story short, for the good of the country, only if Democrats will do entitlement reform.”
While Graham said he was open to capping deductions to raise revenues, he made clear that he remained opposed to raising tax rates on the wealthiest Americans, something President Obama and congressional Democrats have been pushing for as part of a deal.
“I will not raise tax rates to do it. I will cap deductions,” Graham said. ‘If you cap deductions around the $30,000, $40,000 range, you can raise $1 trillion in revenue, and the people who lose their deductions are the upper-income Americans.”
Norquist, who founded the influential group Americans For Tax Reform, strictly opposes tax increases, even during the fiscal cliff negotiations. Graham had previously signed on to the pledge not to raise taxes put forth by Norquist.
Last week, Chambliss drew attention when said he was willing to buck Norquist’s pledge. ”I care more about my country than I do about a 20-year-old pledge,” Chambliss told WMAZ TV of Macon, Georgia. “If we do it his way then we’ll continue in debt, and I just have a disagreement with him about that.”
King, who has also signed the pledge, echoed Chambliss’s assessment as he argued that changing times and a different economic climate justify a new approach. The New York congressman said that while he opposes tax increases, he does not advocate taking “ironclad positions” during the negotiations between Democrats and Republicans on the nation’s fiscal issues.
“I agree entirely with Saxby Chambliss. A pledge you signed 20 years ago, 18 years ago, is for that Congress,” King said on NBC’s “Meet The Press.” He continued: “For instance, if I were in Congress in 1941, I would have signed a declaration of war against Japan. I’m not going to attack Japan today.The world has changed and the economic situation is different.”
I’m already starting to see some on the right choosing sides in the battle which I tend to think will end up being part of the battle for the future of the Republican Party. It will be interesting what it all unfold.
One signs such pledges as Norquist’s when one is craven and weak. It’s herd mentality. Consequently those who break such pledges aren’t doing so because of a new sense of responsibility and the future of that country but because they fear something bigger in the next election. These politicians are the ‘lemmings of opportunistic convenience’.
RINO traitors!!
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Looks like the Tea (Taxed Enough Already) Party is losing influence. Looks like we’re going to move toward some greater economic redistribution and equality. Which would be the Occupy ideology.
And yet, I remember distinctly being told that the Tea Party was a vital and increasingly influential force while the Occupy movement was an abject failure.
@michael reynolds: The Tea Party died when it was taken over by religious crazies, anti-immigrant xenophobes, anti-intellectualists, etc.
There was a time–probably for about the first few weeks of its existence–when it focused specifically on fiscal issues. That Tea Party was supposed to be the group that asked, “That’s fine, but how are we going to pay for it all??” I think the Tea Party that backed morons like Akin and Mourdock has strayed very far from what the organization was created to do.
@Mikey: I agree mostly, but I don’t think the Tea Party was ever “taken over” by those forces, I think they were there from the very beginning. The Tea Party’s public persona was as you describe, but I belive that fundamentally, it was only ever a calculated tool of the very wealthy to get the craziest of extreme viewpoints out onto the table and treated as rational alternatives instead of being laughed out of the caucus as they should have been.
Additionally, to address Doug’s point, I don’t think this is a “battle for the soul of the GOP”. I think this is a lot of politicians reading the proverbial tea leaves regarding how the voting public feels about taxes and deficits. For anyone who still clings to the delusion that Obama and a more liberal agenda didn’t get a mandate in the past election – THIS IS THE PROOF YOU’RE WRONG.
If the Democrats increased spending on any program after passing a tax increase, they give a massive attack ad to every primary opponent of Republicans like Graham.
In the long run, it is probably foolish for Republicans to make deals with Democrats since the Republicans always seem to lose of the deal and the Democrats always win on the deal.
The simple formula for Republicans is that increased taxes means increased spending means a stronger Democratic Party.
In other words, raise taxes on the middle class worker who has a mortgage, health care, etc. But for the love of God don’t think of raising Romney’s precious Capital Gains rate.
@superdestroyer: The Republicans win even when they lose. This country is pulled so far to the right we wouldn’t recognize a left-wing candidate if we saw one. We have two parties – a centrist/right Democratic party and a crazy-right-wing-nut-looney-TEA-party-Norquist-pledge-signing Republican party. The fact that they get roughly equal votes nationally keeps me up at night.
@Mikey:
The Tea Party was, from the moment it began, a cat’s paw. It was a way for the same old Republicans to continue being the same old Republicans without having to address what happened during the Bush administration by pretending they had only existed since January 20, 2008
@Stormy Dragon:
There are very good reasons for taxing investment returns at a lower rate than ordinary income, if your objective is to encourage saving (of which investment is a form). Even nations with far more “liberal” outlooks and tax structures than America generally tax investment returns differently than regular income.
If you want to encourage people to consume all their income immediately, then tax investment at the same rate as ordinary income. It then becomes foolish to defer consumption, because the total long-term tax on the investment will be very high. Non-conservative, non-Romney-fan Matthew Yglesias explains it pretty well: Why Mitt Romney’s Effective Tax Rate Is So Low And Why It Probably Should Be
So maybe sanity and an appreciation of arithmetic has a chance in the modern Republican Party once again. I think the crazy is still in charge, though. I think the Republicans are going to have to lose a couple of election cycles before enough Republicans learn.
I expect Graham to follow the Tea Party in pulling the country over the fiscal cliff.
@stonetools:
Why would you think that? Graham has never shown any affinity for the Tea Party whatsoever.
Whatever moves Graham makes will have little, if anything, to do with following the Tea Party anywhere. Probably the only thing you should “expect” is that the Tea Party will put up a primary challenger to Graham in 2014.
@Mikey:
I’m aware of that, but I have of recently come to believe this is mistaken:
1. Despite capital gains being at a historically low level, there’s also a record amont of money sitting on the sidelines. It’s clear from an empirical standpoint that capital gains rate are not at present the biggest determining factor on investment.
2. Capital gains are not interchangable with investment. There are capital gains that are not investments: If I buy Apple stock today for $100 and sell it for $200 in a year, the Apple Corporation does not see a dime of additional capital. There are investments that are not captial gains: if I extend someone a business loan, all of the interest on that loan is treated as normal income.
3. It’s become clear that it’s too easy to use capital gains to game the tax system, through complicated financial instruments that serve no investment purpose other than allowing normal income to be laundered into “capital gains”.
4. You can only have capital gains when you sell an investment, so lowering the capital gains rate only indirectly subsidizes investing money. What it’s directly subsidizing is when people STOP investing, so in the short term it’s actually counter-productive if you want to stimulate the economy.
5. You only have capital gains if an investment was successful. And the more successful it is, the more you benefit from reduced capital gains rates. So we’re spending most of the subsidy on wildly successful investments–the ones least in need of subsidiy. If you have a borderline oppurtunity that may or may not pan out, capital gains provide very little encouragement to make the investment.
What we should do is change the tax code to treat capital gains as normal income, but let people deduct the cost basis for an investment when the investment is first made rather than when it is completed. That is, using the Apple stock example, instead of giving me a tax break on the $100 of capital gains on my Apple Stock next year, let me deduct the $100 from this years income and then charge me normal income tax on the full $100 when I sell it.
This also has the advantage of simplifying tax preparation since I only need to know what I bought and what I sold in a given year. I don’t have to keep tons of records to track the cost basis of investments I made years ago so that I can do the paperwork when I sell them years later.
@Mikey: Actually, most tax planners would point out that tax indifference is the best: make the rates the same, for investment results and labor results (salary).
And Romney’s carried interest is by no means a return on investment, anyway. VC funds are run by so-called “Management”, which borrows all the money it needs from VC investors, i.e., “fools”, takes a big heap off the top charging for “management fees”, then gets a sizable amount on any returns on the so-called “investment.” You think that the money put into play is any of the VC management teams’ money? It is to laugh.
And then they convince silly politicians that they are “job creators” and great entrepreneurs who put all their money at stake and thus “deserve” a 15% tax rate. Yeah, right. A minimal tax rate on money that comes from a game of “heads I win, tails you loose.” When did Romney ever put any of his own cash at risk? Never.
@Mikey: Nah. I got sick some two years ago, and then I was watching TV all day. I watched that townhall with Arlen Specter. It was basically a reunion of geezers(Since they have Medicare everything is OK) and basic people from the Republican Base. In fact, the first Tea Parties were heavily promoted by Glenn Reynolds and Fox News. In fact, in the beginning there was no one in these events.
@Stormy Dragon: Well, of course not. If we raise the rates on capital gains the guys who make their money investing will stop investing and…go to cash? …wait a minute… that doesn’t sound…
@grumpy realist: I know Matt Yglesias used Romney as an example, but this is really not all about Romney. There are plenty of small investors (myself included) who do put our own money at risk.
Carried interest and capital gains are two entirely different animals, and I believe carried interest should be taxed as regular income because that’s what it IS. It’s payment for services rendered.
@Andre Kenji:
I’m not sure exactly what events you’re referring to, but the earliest Tea Party rallies, held less than two months after Rick Santelli’s movement-sparking rant on CNBC, totaled over 300,000 attendees (according to none other than Nate Silver, who crunched the numbers: Tea Party Nonpartisan Attendance Estimates: Now 300,000+).
@Stormy Dragon:
I’m not sure they ever were, or that anyone has said that, but that’s not the reason they are taxed at a lower rate anyway.
Apple’s stock wouldn’t have gained the $100 if they weren’t doing things right and selling boatloads of iPods. You get a gain because they were able to use your $100 to build out design and production.
Some people say interest income should be tax-advantaged as well.
I agree with this point, but it’s an argument for more general tax policy reform, not for specifically eliminating the tax advantage for capital gains.
Well, short-term capital gains are already taxed as regular income. And we already know one reason long-term gains are taxed at a lower rate is to encourage deferral of consumption.
If we were able to change tax policy very quickly, we could adjust the rate on capital gains based on what we wanted to encourage at a particular point in time–say, raise it when we wanted to encourage immediate consumption (i. e. stimulate the economy) and then lower it when we wanted to encourage long-term investment. But in general we want to favor long-term stability over short-term consumption, for reasons I hope are obvious.
We’re “subsidizing” investment in general, and as any investment adviser will tell you, “past performance is no guarantee of future results.”
One reason capital gains are taxed at a lower rate is to account for the fact the amount of an investment return is affected by inflation, and if it were taxed as regular income, the taxpayer would be paying tax on the percentage of inflation (i. e. the tax is assessed nominal value vs. real value). I’m not sure merely deducting the cost basis is a benefit in this scenario.
Now, of course there are caveats to everything…for example, the reasons your rental property increases in value are very different from why a company’s stock does, but both are taxed as capital gains. So it’s likely that the advantaged treatment capital gains have is not as “good” in some contexts as in others. But in general, if we want to encourage investment–and I think we do–we should continue the tax-advantaged treatment of capital gains.
(Note that this doesn’t mean the rate should be the same for everyone–we could have different “brackets” for capital gains just as we do for regular income. Nor does the rate have to stay at 15%. But it should be lower than that of regular income for long-term capital gains.)
@Mikey:
I fail to see how that is any different from regular income. If I make $100K per year, inflation still eats away at my earning power, meaning I make less by the end of that year.
I have never heard a compelling argument that “investments” or “unearned income” are somehow special and deserve different treatment – not that I have not benefited from the distinction, of course.