The New York Times ran an interesting item the other day -- unfortunately, it was the day after Thanksgiving, when it was easy to miss -- about just how far Republicans are prepared to go to prevent tax rates from increasing on the wealthiest Americans.
Congressional negotiators, trying to avert a fiscal crisis in January, are examining ideas that would allow effective tax rates to rise for the wealthy without technically raising the top tax rate of 35 percent. They hope the proposals will advance negotiations by allowing both parties to claim they stood their ground.
One possible change would tax the entire salary earned by those making more than a certain level -- $400,000 or so -- at the top rate of 35 percent rather than allowing them to pay lower rates before they reach the target, as is the standard formula. That plan would allow Republicans to say they did not back down in their opposition to raising marginal tax rates and Democrats to say they prevailed by increasing effective tax rates on the rich.
Got that? We've talked about how easy it is to mock wealthy-but-ignorant people who go to great lengths to keep their income at $249,999 because they don't understand how marginal tax rates work. But under the plan being floated by Republicans, those silly folks would actually be correct -- GOP policymakers would apply the higher rate to all of their income, rather than just income above a certain threshold, creating a legitimate reason for some wealthy folks to avoid a higher tax bracket.
The larger point, of course, is that these GOP tax-policy contortions -- raising revenue without raising rates -- are becoming farcical. Republicans are arguing that the only meaningful goal in this debate is keeping tax rates exactly where they are, and once that premise is in place, everything else is open to conversation, even scrapping marginal rates for the wealthy.
This, for lack of a better word, is kind of nuts.
Josh Marshall had a good piece on this yesterday.
[I]f the country needs more tax revenue we have a way to do that: raise rates. It's the simplest and most efficient way to go about it.... We've been doing this for a century. When you want to efficiently raise revenues, you raise rates. [...]
Usually when people say they're willing to raise revenues but want to do it by closing loopholes, they're BSing you. And that's most of what we're hearing today. But I think we're at the point where some of the Republicans making these arguments have gotten themselves so wrapped up in a ball of anti-tax verbiage that they may actually be ready to accept some bizarre Rube Goldberg approach to deduction caps which would raise something like the same amount of revenue as tax rate hikes.
I'd just add that what Democrats are talking about is incredibly modest: Clinton-era rates on income above $250,000. That's it. Those folks would still get a tax break on their first quarter-million dollars in income, but they'd pay a slightly higher rate on the rest of their income.
We know these rates don't undermine the economy, because the economy soared in the 1990s. We also know these rates would help reduce the deficit, which Republicans occasionally pretend to care about. And we know that if anyone is going to pay more, policymakers should ask more of the wealthiest earners, since they can afford it and it would have the least impact on economic growth.
And yet, GOP lawmakers are prepared to go to comical lengths to strike a deal that keeps the lower rates -- forever. There's a perfectly sensible and responsible solution -- one that would have been considered a bipartisan no-brainer just a couple of decades ago -- and it's genuinely absurd to see policymakers twist themselves in knots trying to avoid the obvious answer.