Speaker John Boehner said yesterday that any deficit reduction deal that the Supercommittee might reach will have to include tax increases.
Here’s the quote from Boehner, speaking yesterday at his weekly press conference:
“I think there is room for revenues, but I think there clearly is a limit to the amount of revenues that are available.”
If Boehner can deliver substantial Repub votes for a bipartisan deal that includes a net increase in taxes it will be a big breakthrough and create possibilities for progress on a number of fronts. The Repub not-a-penny-more tax position, more recently coupled by a new no-more-cave-ins determination by Dems has been the biggest single reason that progress toward dealing legislatively with either America’s deficit/debt problem or its near-stagnant economy have become impossible.
Boehner said any new revenue would come from the closing of tax loopholes, not from higher rates. He didn’t specify the loopholes nor talk about how much “revenue” the Repubs will support. And — bear this in mind — Boehner has been open to a deal like this before and has been unable to sell it to his caucus. I do assume that he wouldn’t have said what he said yesterday unless he had reason to believe he could sell such deal to his fellow Repubs.
The vast majority of congressional Repubs have signed the “taxpayer protection pledge” of Grover Norquist’s Americans for Tax Reform, which requires them to oppose any increase in taxes. That pledge specifies that any loophole-closing counts as a banned tax increase unless it is offset by a tax cut elsewhere. Boehner’s new statement would break the pledge. As reported in the WashPost, when Boehner was asked about the Norquist problem yesterday, he replied:
“Listen, our focus here is on jobs We’re doing everything we can to get our economy moving again and to get people back to work. It’s not often I’m asked about some random person in America.”
Asked whether he genuinely believed Norquist was a ‘random person’ to members of his conference, Boehner replied, “Listen, our focus is on creating jobs, not talking about somebody’s personality. Our conference is opposed to tax hikes because we believe that tax hikes will hurt our economy and put Americans out of work,”
As a language-watcher, I was intrigued by Boehner statement that “there is room for revenues.” It’s a ridiculous phraseology if you look at it closely (what, precisely, does “room” mean) but it reflects the awkwardness of the moment. Presumably the language doctors have told both parties that the public’s natural flinch reaction to the terms “higher taxes” or “tax hikes” is reduced if they are instead called “revenues.”
So, for years, Repubs have preferred the word “taxes” because they opposed it and wanted it associated with the Dems. The Dems generally tried to avoid blunt terms like “higher taxes” and often substituted “revenues” as a euphemism. The fact that Boehner has adopted the Dems euphemism is actually a stupid sign of hope for a breakthrough, as long as the Dems agree to call the bill “The No New Taxes for Room for Revenues Act of 2011.”
The question is whether more than three Republicans will agree to taxes (excuse me, ‘revenue sources’) that affect the rich more than they do the middle and lower classes.
And of course, taxes are not the only sources of revenue.
“Our focus here is on jobs.”
No, your focus is not on jobs. That is a lie. Your focus is on destroying the economy in an attempt to defeat Obama next year. That is your focus. You know it, the American people know it, and next year the entire world will know it.
There is no room in a civilized society for people like John Boehner.
I will believe that the no-new-taxes dam is cracking once there is a recorded vote in favor of any kind of new revenue. Until then, it’s just talk.
Wasn’t it just a month or so ago when all of the GOP candidates for president raised their hands in opposition of a hypothetical deficit reduction plan of 10 to 1 spending cuts to tax increases?
The potential sources of revenue include eliminating subsidies, which the Tea Party has signaled is fine with them.
Grover Norquist may have a different standard as to who is a tax/revenue purist, but in the debate over tax *reform*, most ideas put on the table by the conservative presidential candidates with connections to the Tea Party include eliminating “tax loopholes” which include ethanol subsidies, oil and gas subsidies, and any other example of crony capitalism where the government is picking winners and losers in a marketplace through loans and subsidies.
Boehner and Norquist represents the old guard GOP which started out this congressional session thinking it could tell the new members to shut up and sit down. It’s becoming clear they’re beginning to listen to what the Tea Party has to say.
I thought I saw a pig fly by this morning… Naw.
I find that any congressman who feels his/her pledge to uphold the constitution and represent their constituents is subordinant to pledges their pledge to some random organization is at best failing at their elected duties, and at worst, seditious.
We need plain talking Congresspeople, who speak for the good of the Republic, and not to single interest individuals, and not lead from behind ‘*-speak’
Eric: “The Repub not-a-penny-more tax position, more recently coupled by a new no-more-cave-ins determination by Dems has been the biggest single reason that progress toward dealing legislatively with either America’s deficit/debt problem or its near-stagnant economy have become impossible.”
This seems to ignore the huge amounts of stimulus that have been spent already. Or are you suggesting that we could have jump started the economy with tax increases? Even the deficit is barely dented with tax increases only on the wealthy. If we hit only $250k and above that only brings in about 5% of the deficit. Barely a rounding error in terms of the whole budget.
Peder–
There’s some question as to whether the ~$800 billion stimulus was really huge (at least compared to the ~$2 trillion recommended by some economists). More than half of it went to financial bailouts and already committed spending.
And, are you assuming tax increases on only personal (as opposed to corporate) income? Income taxes only, or other taxes such as the inheritance tax?
Half of the gigantic deficit George Bush bequeathed to Mr. Obama was caused by his tax cuts for the wealthy, and the other half by his off-budget wars in Iraq and Afghanistan.
Letting the tax cuts expire (all of them, not just those for the 1%) would go a long way each year toward eliminating the deficit.
And the deficit, of course, is not the problem. The problem is a lack of investment that would create jobs and make the economy grow (at last). Bills for investment seem to infuriate the Republican Right even more than equitable taxation, as we see by their rejection of every job creation bill. The deficit is just their excuse.
Tim Pawlenty showed that you can been seen as abiding this ridiculous pledge but still fool people into thinking that raising “fees” to raise revenues is somehow different. The names are different but the people paying them feel the same burden.
The right has no problem with “private corporations” gouging people even if they’re regulated and charges rates enforceable by law. Gas, electric and telecommunications companies are “private” but there are a lot of government ones too. They all charge rates. Insurance companies charge fixed rates too. But it’s only a problem for the right when the government starts covering people who can’t afford it.
Bernice, you can keep repeating that but it isn’t true. If you zeroed out the defense budget, not just the current wars part but the whole thing, you save about $700 billion a year. If you remove all of the Bush tax cuts you get about another $300 billion. The current deficit is $1600 billion.
Adjusting for inflation the total defense budget of ’99 was about $400 billion. That was before we were fighting a couple of big wars so I think it serves as a decent point of comparison. Can we trim it back? Yes, and we should, especially if we actually wind down our current conflicts. But there is no way that you can point to this as the reason for the enormous deficits of the Obama era.
Paul, from what I can find we collect about $200 billion a year in corporate taxes. My understanding is that the US corp taxes are some of the highest in the industrialized world. Even after you account for various tax breaks and whatnot.
I don’t know how much more you can really raise in corporate taxes. There are certainly some loopholes that could use plugging but I don’t know how big they really are. I’d be stunned if you could even double current receipts with that approach. I’m no expert though and willing to listen to any such argument to this point.
The truth is that if we want to balance this out we need some really, really big growth and a much sterner eye on what the priorities are. I’m currently pessimistic on both.
Peder–
The _marginal_ United States corporate tax rate is among the highest in the industrialized world. The actual corporate income tax paid as a percentage of corporate earnings is not; partly due to the fact that corporate profits can be assigned to ‘subsidiaries’ located in places like the Cayman Islands, where there are no taxes. This is the obvious loophole to be plugged.
On the current deficit —
One big factor is the current recession (depression might be more accurate): this results in a drop in tax revenues that is greater than potential drops in spending.
At the same time, government spending increases as greater numbers of unemployed shift from contributors to revenue to consumers of it (various safety net programs).
Finally, there is an irreducible core deficit attributable to basic financial operation. Just shifting money around (part of any large organization; public or private) entails short term debt.
You are correct that the economy needs to grow — businesses will increase spending when demand (people with money in their hands that they are likely to spend immediately) increases.
Until then, business (who do currently have excess capital) will continue to invest in whatever gives them the most profit.
Some numbers: these are from 2002 — I’m still looking for more current ones but I doubt that there’s been a significant change:
Eighty-two of the 275 companies, almost a third of the total, paid zero or less in federal income taxes in at least one year from 2001 to 2003. In the years they paid no income tax, these companies earned $102 billion in pretax U.S. profits. But instead of paying $35.6 billion in income taxes as the statutory 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they received outright tax rebate checks from the U.S. Treasury, totaling $12.6 billion. These companies’ “negative tax rates” meant that they made more after taxes than before taxes in those no-tax years.
Twenty-eight corporations enjoyed negative federal income tax rates over the entire 2001-2003 period. These companies, whose pretax U.S. profits totaled $44.9 billion over the three years, included, among others: Pepco Holdings (-59.6 percent tax rate), Prudential Financial (-46.2 percent), ITT Industries (-22.3 percent), Boeing (-18.8 percent), Unisys (-16.0 percent), Fluor (-9.2 percent) and CSX (-7.5 percent), the company previously headed by current Secretary of the Treasury John Snow.
In 2003 alone, 46 companies paid zero or less in federal income taxes. These 46 companies told their shareholders they earned U.S. pretax profits in 2003 of $42.6 billion, yet they received tax rebates totaling $5.4 billion. Almost as many companies, 42, paid no tax in 2002, reporting $43.5 billion in pretax profits, yet receiving $4.9 billion in tax rebates. From 2001 to 2003, the number of no-tax companies jumped from 33 to 46, an increase of 40 percent.
In 2001, the Treasury paid corporations $40 billion in tax refunds, a third more than the 1998-2000 average.
Then in 2002 and 2003, after the law was changed to expand tax subsidies and make it easier for corporations to carry back excess tax breaks to earlier years, corporate tax refunds skyrocketed to an average of $63 billion a year – more than double the 1998-2000 average.
source: http://reclaimdemocracy.org/corporate_welfare/real_tax_rates_plummet.php
And from yesterday’s Seattle Times (I’ve elided some material of mainly Seattle interest):
Few big companies pay anything close to 35 percent federal tax rate
……….
By Drew DeSilver
Seattle Times business reporter
………….
The report also called Boeing one of the nation’s largest corporate recipients of government tax subsidies, with nearly $3.6 billion in the 2008-10 period.
The report comes as the nationwide Occupy movement has focused attention on corporate influence on government, and as the congressional supercommittee searches for a consensus plan to reduce the yawning federal budget deficit.
While the statutory federal corporate income-tax rate, 35 percent, is one of the highest in the world, few companies pay anything close to that. Of the 280 companies analyzed by CTJ and ITEP, only 72 had effective U.S. three-year tax rates above 30 percent.
The two groups did not accuse companies of outright cheating on their taxes. On the contrary, they reported, “the loopholes and tax breaks that allow low-tax corporations to minimize or eliminate their income taxes are generally quite legal.”
The report pegged Boeing’s effective U.S. tax rate over the past three years at -1.8 percent.
Paul, thank you for the response. I especially appreciate some actual figures. I thought this was in interesting selection on the anti-corporate tax front:
http://www.theatlantic.com/business/archive/2010/10/why-we-should-eliminate-the-corporate-income-tax/65351/
I think it’s telling that the Obama admin is looking to cut loopholes but not raise the overall rate. In fact, if I’m understanding things correctly, they want the overall collection amount to be fairly unchanged. In other words, they don’t see this as a big deficit reducer.
Peder–
I’m not sure that there is _an_ Obama administration right now — that’s one of his problems. But I think that their consensus is that the best way to increase revenue is to revive the economy rather than siphon money out of it.
And note that if Bush'[s tax cuts are allowed to lapse, that would be an effective tax increase over the current situation.
The Atlantic article is interesting, but a bit sophistic. I’ve seen most of the arguments before; many economists would disagree with her judgement of what -most- economists say.
Paul, my guess is that the Obama admin fears that any real corporate tax increases would push more jobs overseas.
And man, your first sentence is not exactly a ringing endorsement on reelecting this guy.
Peder–
I’m not, nor have I ever been, an Obama fan.
He’s just the best game in town right now. So I (cynically) suspect that his main motivation is staying on the good side of his corporate contributors.