DANGER: TAX TRIGGER AHEAD
Published on TheHill.com on May 4, 2011
A diabolical plot is being hatched between Senate Democrats, the White House and three Republican accomplices — Tom Coburn (Okla.), Mike Crapo (Idaho) and Saxby Chambliss (Ga.). The concept is to enact an amendment to the debt-limit extension specifying certain targets for deficit reduction and then mandating automatic spending cuts AND tax increases to take effect if the goals are not met.
This formula permits backdoor tax increases on which nobody votes and no fingerprints appear. The taxes just happen automatically — the immaculate conception tax increase. The plan will vindicate Obama’s long-term goal: to expand the size of the government’s share of the economy.
When he took office, federal, state and local spending accounted for 35 percent of GDP. Now it equals 44 percent. But as long as the extra spending is borrowed, it is not permanent. So Obama’s goal has been to lock in the higher level of spending by matching it with higher taxes.
But even the Democrats are smart enough never to vote for tax increases on the general public and, only with some hesitation, to impose them on the wealthy. Now, with the automatic trigger, they and their Republican allies can vote for higher taxes while seeming only to be supporting deficit reduction. When the taxes come as a result of the automatic trigger they enacted, they can blame future Congresses for not agreeing to the spending cuts. They can even rail against the tax increases. It won’t matter. The tax hikes will take place automatically.
Of course, what one Congress mandates, another can repeal. But the mechanism of passing a law to block the tax increases is far more difficult. You would need 60 votes in the Senate and control of the House and the presidency — a tall and probably impossible order for future anti-tax Republicans. So the politicians can have it both ways — they can oppose tax increases and watch them take effect without their fingerprints on them.
So the game plan is for the debt-limit extension to stall in the House and for the bipartisan group of six senators to swoop in with their legislation to save the day. It will seem, to all appearances, that they will have mandated deficit reduction as the price for a debt-limit hike. So far, so good. But the tax trigger will be part of the package, and we will have stripped Congress of the power to tax and delegated it to an automatic trigger.
The crucial actors in this sham are the three Republicans who are part of the six-member “bipartisan” group that is cooking up the idea for the automatic trigger. Without the political cover Coburn, Chambliss and Crapo afford, the Democrats would never be able to push so audacious a plan. But Coburn has a sterling reputation as a fiscal conservative, as does Chambliss. All three Republican senators were just reelected (without breathing a word of their true intentions to their constituents). It is vital that all Republicans let these three senators know what we think of their plan for automatic tax increases.
Of course, once the trigger is enacted, the spending cuts won’t happen as promised. Even if they are enacted, the experience with previous spending-cut/tax-increase deals is that the taxes happen but the cuts don’t. Even if the spending reductions are actually enacted, they will likely be vitiated by the impact of tax increases on the economy. The taxes will drive down what economic growth remains, depressing government revenues and driving up entitlement safety-net spending. As a result, the deficit-reduction targets won’t be reached and even more tax increases will have to be triggered. A vicious cycle akin to that which has ruined cities like Detroit will set in.
The Gramm-Rudman Act of the ’80s imposed similar automatic provisions if deficit-reduction targets are not met, but these triggers mandated spending cuts, not tax increases. Even so, the Supreme Court ruled that the legislation was an unconstitutional delegation of Congress’s power to tax. Likely this deal is as well. But we must head it off before it gets on the statute books.