Unlike some of my RedState colleagues, for reasons I explained on Tuesday, I agree with the basic theory behind John Boehner’s Plan B solution to the tax side of the fiscal cliff standoff: rather than trading Republican blessings on tax hikes for illusory “spending cuts,” let Democrats get the tax hikes they want with no pretense that Republicans support them, pass a bill making permanent those tax cuts both sides can agree on, and take the dispute back to the voters in 2014 and 2016. Then we can have the straight-up spending debate, and hold the line on further demands for even more tax hikes beyond the ones that Obama can get simply by not making a deal.
But Boehner has made what I regard as one significant mistake in this fight: he’s letting the Democrats get to his right on middle class tax cuts. Democrats are complaining that Plan B doesn’t extend some of the tax cuts for middle and lower income taxpayers, such as the “temporary” payroll tax cut, the Alternative Minimum Tax fix and the “American Opportunity Tax Credit” for certain college expenses (you can see the White House’s talking points, driven off yet another study by the left-wing Tax Policy Center, here and here). Some of this is disingenuous, as Democrats characterize the end of temporary government spending on non-taxpayers (including some aspects of the child tax credit and Earned Income Tax Credit) as “tax hikes.” But there are also some legitimate increases in taxes actually paid, mainly the expiration of the payroll tax cut, that will go into effect in the new year if Plan B is the only thing that passes. In other words, Democrats really are pressing for some tax cuts that Republicans are not.
This should never, ever happen to any competent Republican. It’s precisely how Obama outflanked Romney on the tax issue during the summer, and you would think the election results should have taught GOP leadership not to repeat that mistake. If anything, Republicans should up the ante: make the payroll tax cut permanent, and dare Democrats to block it. Any time Republicans get a Democrat to concede the value of tax cuts, that’s a conservative victory and should be taken to the bank while the getting is good. (As to the particulars of tax credits, Republicans uncomfortable with the structure can always devise an alternative of equal size). Make the Democrats be the ones to argue that Obama’s own payroll tax cut is unsustainable or unworkable. As things stand right now, workers – including members of the “47%” who pay no federal income taxes – are enjoying the benefits of being able to spend the money they earn instead of having it taken by the federal government. They are seeing in action the most important conservative fiscal policy argument of all. Republicans should never be the ones standing against that.
I believe it was Conn Carroll who remarked after the election that Ronald Reagan would have looked at 47% of the country paying no federal income tax and called it “a good start.” That philosophy animated Republicans under Reagan’s and George W. Bush’s presidencies and under Newt Gingrich’s Speakership: cut taxes for as many people as possible at every possible opportunity. While GOP tax cuts in those eras often benefitted the wealthy who paid the most taxes in the first place, they frequently offered proportionally equal or greater benefit to taxpayers at every income level. That’s why the party’s tax-cutting brand helped it appeal to middle class and non-wealthy suburban voters. The Romney campaign never understood the importance of never letting Democrats pose as being to the Republicans’ right on taxes, and as a result let Romney and the party get painted as too narrow in its economic appeal. If he wants the GOP to stop being the Stupid Party, Boehner should learn the lesson of Romney’s defeat, and amend Plan B to include, extend or expand every tax cut the Democrats claim to be willing to support. And Republican tax policy going forward should make that a line as stringently defended as the ATR no-tax-hikes pledge.