Are Republicans now willing to raise taxes, even just a smidgen? The calculation is hardly straightforward. Sen. Pat Toomey, a SuperCommittee member, proposed, according to AP, raising “$250 billion in revenue … from a sweeping revision of the tax code that would bring the top rate down from 35 percent to 28 percent while reducing or eliminating many commonly used itemized deductions.”
If nothing is done, the top marginal income tax rate reverts to 40 percent in 2013 (or even 44.8 percent). So is the Toomey Plan a tax hike and a violation of the anti-tax pledge many Republicans have taken? Do you measure by extrapolating the present code or by assuming the Bush expiry and then measuring from there? Roll Call outlines it: “So the Republican plan would be a small net tax increase if existing tax rates continue, but it would score as a giant tax cut — exceeding $3 trillion over the next decade — relative to letting the Bush tax cuts expire.”
Here is House Budget Chairman Paul Ryan’s full answer on the topic from our chat yesterday:
RYAN: You’ve got to measure these things in the context of current law and the current path, which is the top rate goes to 44.8 percent and becomes extremely progressive and it just destroys small businesses. Nine out of ten businesses in Wisconsin are pass-through entities, sub-chapter S, sole proprietors. This is devastating to them. So bringing the top rate down to 28 percent and lower for the rest of the scale is a very good thing. I believe from a dynamic standpoint you’ll raise more revenues. I don’t buy these static analysis models anyway. So to me, again it’s kind of a faulty … I think the question is can you get Republicans to somehow renege on a principle is what I think these questions are based at.
PETHOKOUKIS: So is the Toomey plan acceptable to you?
Yeah, he’s bringing rates down. They’re at 35 today, they’re going to 45 and he’s bringing them to 28. I don’t buy into that static stuff anyway. It’s as if some cardinal sin has been committed here. … What matters is that the rates are going down. Everybody — whether you’re a Steve Forbes flat-tax guy, which is more what I like, or you’re a Fair Tax guy or a 9-9-9 man — believes in broadening the tax base and lowering the rates for growth, stop picking winners and losers in the tax code and having a very efficient tax system for growth. And what Pat Toomey produced is perfectly consistent with those principles.