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Tuesday, August 2, 2011

Ezra Klein On Future Revenues

August 2nd, 2011

Ezra notes that there are still many options available to raise revenue... and that Speaker Boehner still doesn't seem to understand how government works:

"When Speaker John Boehner was trying to reassure his members that the debt deal wouldn’t lead to tax hikes, he fell back on an unexpectedly technical — and incorrect — argument. The deal, he said, “requires baseline to be current law, effectively making it impossible for Joint Committee to increase taxes.” That’s not just wrong. It’s wrong in a way that gets at a fundamental fact about the relationship between Boehner and the two groups who judge his work:

his members, and the Congressional Budget Office."

"What Boehner meant is that any deal drawn up by the supercommittee would be scored by the Congressional Budget Office against a future in which the Bush tax cuts are supposed to expire. So if the committee tried to raise tax rates, they’d have to raise them by more than the cost of the Bush tax cuts if they were going to raise any revenues. This would require raising taxes by more than $3.5 trillion — an obvious non-starter. Thus, he argued, it would be effectively impossible to raise taxes.

But that’s not quite right. The baseline would just make it difficult to raise tax rates — which is how McConnell explained it when he sold the deal to Senate Republicans. But there are plenty of ways to raise taxes that don’t include raising marginal tax rates. The joint committee could cut loopholes and cap expenditures and the Congressional Budget Office would score that as raising revenues. They could recommend a value-added tax or a carbon tax and that would raise revenues. Republicans know this perfectly well, as this is the approach to raising taxes that they rejected during the debt-ceiling negotiations."

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