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Are Some Republicans Ready to Deal on Taxes?

A Commentary by Froma Harrop

Tuesday, July 17, 2012

Nowadays, few politicians will stray from party orthodoxy without also taking unfair whacks at the opposition. Sen. Tom Coburn, Republican from Oklahoma, is braver and more principled than most. But even he felt obliged to take partisan cover in his most recent blast at activist Grover Norquist, enforcer of the absurd pledge never to let anyone's taxes rise ever.

If wrongly accusing Democrats of refusing to compromise on taxes and spending is the price Coburn charges for an otherwise intelligent conversation, let's pay it. Anything for progress.

Coburn correctly notes that Democrats take joy every time the lobbyist Norquist shows up on Capitol Hill demanding that Republicans, in the senator's words, "defend every loophole and spending program hidden in the tax code."

Yes, many tax breaks are little more than sneaky spending programs. Coburn last year went after the ethanol tax credit, which effectively handed $5 billion a year to petroleum refineries that blended ethanol into gasoline. Iowa Republican Sen. Chuck Grassley, working with Norquist, tried but failed to defeat the valiant effort to do away with this taxpayer giveaway.

Republicans really want a Reagan-style tax reform, Coburn insists, "that lowers rates and broadens the tax base by getting rid of loopholes and deductions." That's a fine idea if , at the end the day, more revenues are coming in than are now.

Not all Republicans are as courageous as Coburn in actually naming tax breaks that need to go. Every goodie in the tax code has lobbyists standing guard. While Republican presidential candidate Mitt Romney has expressed support for the tax-broadening concept, he has neglected to name a single loophole or deduction he would knock off.

Also not encouraging are strong hints that Romney may choose former Minnesota Gov. Tim Pawlenty as his vice presidential running mate. As a presidential candidate, Pawlenty called for ending all taxes on capital gains and dividends in addition to cutting the marginal tax rates. Amazingly, this would free some of the wealthiest Americans from paying any federal income taxes at all. (The richer one is, the more one's income is likely to come from investments.) Pawlenty's plan would also reduce revenues by almost $12 trillion through 2021, according to the Tax Policy Center.

In broadening the tax base, President Reagan agreed to end all preferential treatment for capital gains, effectively raising the capital gains tax for high earners to 28 percent from 20 percent. That was the tradeoff for lowering the marginal rates. Are Republicans, even with Norquist sidelined, capable of making that kind of compromise? Capital gains are now taxed at 15 percent, and Romney vows to cut them further.

It was only 11 months ago that Romney and seven other Republican candidates were asked at a debate whether they would accept $1 of new tax revenues for $10 of spending cuts. Not a hand went up.

We are nearing the anniversary of last summer's disgraceful standoff over raising the country's debt limit. Having routinely hiked the debt limit in the George W. Bush era and before, Republicans decided to play games with America's credit rating by holding up approval. They even rejected an earlier deal made with Democrats to cut $3 trillion in spending in return for $1 trillion in tax revenues, mainly from closing loopholes. That would have been $4 trillion in deficit reduction over 10 years.

Coburn and other thoughtful Republicans could herald a new day. If Coburn has to sate the partisan lust for liberal scalps by pairing an end to sweetheart tax breaks for the ethanol industry with that for Hollywood producers, a generally Democratic lot, no problem. Actually, he has a deal. Let's talk.

COPYRIGHT 2012 THE PROVIDENCE JOURNAL CO.

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