This Is Supercommittee Republicans' Idea of a Tax Increase

By Derek Thompson

In this morning's article on the supercommittee's widely expected failure to come to an agreement to reduce the deficit, I laid blame at the feet of Republicans, who rejected what struck me as a fair, even right-of-center, proposal from Democrats to cut the deficit by $3 trillion, with $1.2 trillion in new tax revenue and $500 billion in Social Security and health care spending cuts.

The pushback to this piece has focused on a plan by Sen. Pat Toomey of Pennsylvania to raise taxes by as much as $300 billion. Robert Samuelson writes:

Contrary to much press coverage, the committee's Republicans opened the door to compromise by abandoning -- as they should have -- opposition to tax increases. Sen. Pat Toomey of Pennsylvania proposed a tax "reform" that would raise income taxes by $250 billion over a decade. First, he would impose across-the-board reductions of most itemized deductions and use the resulting revenue gains to cut all tax rates. Next, he would adjust the rates for the top two brackets so that they'd be high enough to produce the $250 billion. All the tax increase would fall on people in the top brackets.

Toomey's plan is a reincarnation of this plan, drawn up by former Reagan adviser Martin Feldstein and Maya MacGuineas from the Committee for a Responsible Federal Budget, to limit deductions for richer households. (Quick tax explainer: You can either raise tax revenue with higher rates or lower deductions. Most economists agree that we should focus on stripping out deductions before adding higher marginal rates.) But whereas Feldstein and MacGuineas raised an additional $250 billion in one year, Toomey's would raise $250 billion over ten years. He offsets the vast majority of the tax increase by reducing tax rates by a fifth for rich families.

So, did Republicans propose a tax increase? Yes, they did. They proposed a tax increase so small that it amounts to pennies on a plan drawn up by an former adviser to Reagan and a former adviser to John McCain.

There are plenty of conservatives with smart ideas about fixing our tax code. Their ideas didn't make it into the supercommittee.

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This article available online at:

http://www.theatlantic.com/business/archive/2011/11/this-is-supercommittee-republicans-idea-of-a-tax-increase/248836/