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Waiting for a war tax

Why is the issue of increasing taxes mostly absent from the congressional debate over war costs?'s Tom Curry explains.
Image: Senate Majority Leader Reid speaks during a news conference in U.S. Capitol in Washington
Senate Majority Leader Harry Reid speaks about the costs of the wars in Iraq and Afghanistan as Sen. Charles Schumer, D-N.Y. looks on.Molly Riley / Reuters
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If there’s an air of unreality about the debate in Congress over the cost of the Iraq war, there are two reasons for that.

First, since President Bush will not sign a tax increase into law, members of Congress in both parties must wait for the next president to propose tax increases in 2009 to help pay for the war.

Second, the current income tax rates don’t expire until 2011, thus no retooling of those rates is going to be enacted much sooner than that.

In a briefing for reporters Tuesday on a new estimate by the Joint Economic Committee on the costs of the wars in Iraq and Afghanistan ($3.5 trillion between 2003 and 2017), Democratic leaders did not once mention a tax increase.

They did decry the diversion of revenues to Iraq and Afghanistan that they’d prefer to have been used in the United States.

House Majority Leader Steny Hoyer accused Bush of saying, in effect, “there’s too much being spent on American students, on American children for their health care, on communities for the investments in infrastructure, but we are sending $200 billion extra to Baghdad and Kabul.”

Bush on Tuesday vetoed the $150.7 billion Labor-HHS-Education spending bill, because it would have spent $10 billion more than what he’d proposed.

Borrowing from China, Saudi Arabia
At their Tuesday “war costs” event, Democratic leaders also lamented the costs to the taxpayers of borrowing hundreds of billions of dollars to pay for operations in Iraq and Afghanistan.

“We are borrowing money from Saudi Arabia, China, Japan, Mexico,” said Senate Majority Leader Harry Reid.

“Had the administration paid for the war instead of borrowing, these (interest) costs would have been significantly lower,” said Joint Economic Committee chairman Sen. Charles Schumer.

But “paid for” how exactly?

Schumer emphatically did not want to discuss tax increases. Asked whether it would make more economic sense to raise taxes to pay for Iraq and Afghanistan operations rather than to borrow money, Schumer quickly said, “Well, I don’t know about tax increases.”

Some less senior Democratic senators were willing to talk Tuesday about tax hikes.

Sen. Amy Klobuchar, D-Minn., said, “I think we have some messed-up priorities and I think we need to change the way we’re entering into tax reform. I think the answer is to roll back the Bush tax cuts on the wealthiest, the people making over $200,000 a year.”

She said she also favored closing some tax loopholes, including benefits for oil companies.

She also said that withdrawing U.S. troops from Iraq would reduce the fiscal burden of the war.

But Democrats still tend to look back to what they see as Bush’s mistakes of the past more than they look forward to actions the new president will take in 2009.

Looking back to the 2003 tax cut, Sen. Ben Cardin, R-Md., said,  “That policy was wrong. You don’t cut taxes when you’re going to war.”

He added, “I think we need to pay for a significant part of these (Iraq and Afghanistan) costs. I don’t have a specific proposal as to whether it should be a tax increase.”

Cardin agreed that the 2011 expiry of the current income tax rates is looming over the tax debate.

Need for 'courage' on tax increases
Sen. Byron Dorgan, D-N.D., said, “You have to have the courage to say to the American people, ‘We are sending our soldiers, would you please help me pay for this?’”

Dorgan said he would propose some “revenue raisers that ought to accompany” the $194 billion Iraq supplemental spending bill when it is debated, probably early next year.

Meanwhile GOP Senate leader Mitch McConnell of Kentucky who is up for re-election next year, made it clear Tuesday that Republicans will run in 2008 on their opposition to tax increases.

He said that one lesson of last week’s election results was “the tax issue is back on the front burner in American politics going into 2008. The American people are speaking here again, and they are not interested in having tax increases.”

Republicans unified on anti-tax stance?
He cited as evidence the overwhelming defeat of a tobacco tax increase in Oregon and the defeat of the mayor of Indianapolis and the majority of the city council over a tax increase.

He also pointed to last week’s House vote to increase taxes on a form of income called “carried interest” which is earned by hedge fund and other investment managers. Not one House Republican voted for that measure and it’s expected to die in the Senate.

Opposition to increasing taxes, McConnell said, “unifies Republicans of all stripes.”

The debate during the next year he said will be “over just who wants to increase the tax burden on the American people.”

Whether or not Republican leaders are correct in thinking that an anti-tax position is the key to their success in 2008 elections, congressional Democrats are now mostly biding their time on the issue of how to pay for the war.