Fiscal Cliff

Mr. President: Strike a deal before Grover Norquist wakes up

 

The difference between a tax-rate increase and a tax increase may give Obama and Boehner wiggle room.

Bloomberg View Editorial

Is Grover Norquist really going to let John Boehner get away with this?

Boehner, the Republican speaker of the House, thinks he has found a way out of the corner Norquist has put him in. Norquist is the conservative gadfly and chief enforcer of the no-tax pledge, which requires all signers to swear on Ronald Reagan’s grave never — never ever — to vote for a tax increase.

Boehner, who along with practically everyone else in his party has signed the pledge, has lately been careful to say that what he opposes is a “tax-rate increase.” But you can raise a fellow’s taxes quite a bit without touching his tax rate.

Your tax rate is just the percentage of the last dollar you earn that goes for taxes. But your bottom-line tax bill is affected by many other things: not just deductions and exclusions (known as “loopholes” when you don’t approve of them), but also by tax brackets and rates below the top. By the end of the presidential campaign, even Republican nominee Mitt Romney was talking about phasing out deductions as incomes rise, or limiting how many dollars of deductions someone can take.

In short, there’s more than one way to skin a fat cat. Theoretically, you can reverse-engineer a tax code raising almost any amount of money you want — and with almost any distribution of the burden you want — without touching the top tax rate. Politically, of course, it might not be so easy.

None of this changes the fact that it’s possible to make the tax code more progressive without raising rates. Or that Boehner is begging for a deal that could be labeled tax reform, not a tax increase. Close the loopholes, enjoy the revenue, and keep the top rate steady. Or, what the heck, close some more loopholes, lower the top tax rate, and still have enough to throw at the national debt. Maybe even start a new program or two.

On top of everything, this would even be good tax policy. Loopholes complicate the tax code and create perverse incentives in the economy.

So why isn’t President Barack Obama seizing the deal and declaring victory before Norquist wakes up? Why is he insisting on a tax-rate increase for high-income people? That’s not a rhetorical question. We really don’t get it.

The best we can come up with is that the president’s position is tactical, not on the merits. He might think, with some justification, that House Republicans won’t necessarily follow their speaker. And with all the tax cuts expiring in a matter of weeks, his position is only going to get stronger: If everyone’s taxes go up on Jan. 1, more than just Norquist will be unhappy.

We don’t believe, as Obama’s critics do, that the president wants a tax increase simply to soak the rich. We believe he wants a tax increase to raise the money needed to run the government, and to do so as fairly and efficiently as possible.

At least, we want to believe that. Norquist reiterated his humble brag this past week about how he has no power to release members of Congress from their promise. “The pledge is to the American people,” he said. Which makes the task all the more urgent: Mr. President, cut a deal with Boehner before the Norquist monster fully awakes.

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