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    Are Republicans Set to Cave on Tax Hikes?

    A skilled poker player as they say, never shows his cards. Republicans seemingly haven't heard such advice.  With 'fiscal cliff' negotiations taking place in the media of late, they are proving to be poor poker players, poor negotiators, and all-too-willing to fold.  

    Several Republicans, responding weak-kneed in a kneejerk reaction to their 2012 election beating, have signaled a willingness to compromise on tax hikes, despite little indication that Democrats would make similar concessions with spending cuts. Senators Saxby Chambliss (R-GA), Lindsay Graham (R-SC), and Peter King (R-NY) have gone so far as to walk back a no-tax pledge they placed their signatures upon.

    Amelia Chasse, vice-president of Hynes Communications, says that while Americans are looking for both sides to come together after the election, Republicans should not be so quick to give away the farm.

    Discussing the matter on Neil Cavuto's show late last week, Chasse opined that, "In terms of raising taxes, I think Republicans will be making a huge mistake with their constituents if they agree to any proposal that raises taxes for the sake of raising taxes".

    According to a source with knowledge of the negotiations however, Republicans are set to do just that.  Their information indicates:

    "We suspect that enough Republicans could support a top tax rate in the 37-38% range along with limits on deductions, which together would raise $600-800 billion over 10 years.  Along with a few other revenue provisions, the total deficit reduction from revenue could reach $1 trillion."

    The 37-38% represents an increase on the current level of 35%.  Chasse indicates that such a tax hike plan "would raise rates for some of the most vulnerable taxpayers in this economy – small business owners".  Furthermore, limits on deductions would have the same economic effect as raising marginal rates on upper-income taxpayers even further.

    Why would Republicans agree to such a plan?

    "The key to Republicans going along with this tax increase," the source adds, "is structural reform of entitlement programs".  This would presumably involve such programs as Social Security, Medicaid, and Medicare.  The wisdom being that meaningful deficit reduction can be accomplished through 'means testing' and raising the eligibility age.

    FreedomWorks Vice President of Health Care Policy, Dean Clancy, doesn't believe these methods will be successful.

    "These two ideas are unpopular, and, while they are better than across-the-board cuts, they do not alter the underlying structural problems with the big entitlement programs or make them more voluntary for individuals."

    He adds, "If ObamaCare goes into effect, raising the Medicare retirement age will have the effect of increasing federal outlays for ObamaCare premium subsidies and for Medicaid."

    So a cave-in on tax hikes is being negotiated for the benefit of a deficit reduction plan that would likely be unsuccessful.  But at least an agreement and compromise on tax rates and entitlement reforms will lead to significant cuts in the deficit, avoiding an economic calamity, right?  

    Not quite...

    The real key for a fiscal cliff breakthrough, according to the source, lies with the President himself.

    "If he puts major entitlement reforms on the table, a grand bargain that reduces the deficit by roughly $2-2.5 trillion over ten years is likely."

    Such a 'grand bargain' would fall significantly short in terms of necessary deficit reduction over the next decade.

    Clancy claims, "We would need more like $8 trillion in savings over 10 years to balance the budget within 10 years."  

    Chasse agrees, stating that the President's proposals "would barely make a dent in the deficit".

    With the fiscal cliff looming in the near future, Republicans are foolishly signaling a willingness to concede on tax hikes.  Such concessions - with little to no valuable reductions in spending and entitlements - indicate the party has not only lost the election battle of 2012, but they may be willing to surrender in the war on conservative fiscal values.

    1 comments
    Rusty Jewell
    11/29/2012

    I really disagree with this article. Before we can win the substance of the argument, we have to win the PR battle. And we are losing the PR battle big time. It no longer matters as much as what our politicians do as it does what they say and are perceived to want to do. The new attack should be to state publicly at every chance that we are reaching across the isle, that we are working with President Obama. Make Obama put HIS proposal on the table and let everyone know it is HIS proposal and that is the framework that is going to be used.

    We are in a weak economy right now with an even weaker recovery. A 2-3% tax hike on the wealthiest will be welcomed by at least the lowest 50% income earners. Most likely it will be welcomed by at least 65-70% of the voters. If those voters are informed that the Republicans do not truly support the tax hike but will vote for it in the name of bipartisanship, the R's will gain favor with them. If the economy gets weaker, so be it. If the R's have proclaimed loudly enough that it is Obama's tax hike, he will be the one to pay for it for the next 4 years. The Dems will be the ones to pay for it in the next 2 elections. If we are still seen as the obstructionist party, we will lose the war in the end.

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